Environmental regulation, outward foreign direct investment, and China’s green total factor productivity

Abstract

Increasing green total factor productivity (GTFP) is currently the primary goal of sustainable development worldwide. GTFP not only reflects the efficiency of economic expansion but also encompasses resource consumption and pollution. This research enhances the current understanding of GTFP by indicating that aside from reverse technology spillovers, labor mobility, and changes in industrial structure, additional factors, such as environmental regulations, exert a dynamic function in shaping the influence of outward foreign direct investment (OFDI) on the GTFP of the home nation. The empirical findings indicate that OFDI has a single threshold effect on GTFP, and the negative effect increases with the reinforcing of environmental control. The main impact comes from home country’s changes in green technology (GTC) rather than changes in green efficiency. Additionally, environmental regulation has a positive moderating effect on OFDI, the moderating effect of environmental regulation in western regions is more pronounced in promoting the home country’s GTC. It is imperative to take into account regional variations and devise distinct policies for eastern, central, and western regions.