Analyzing the Effect of Local Government Competition on Green Total Factor Productivity From the Market Segmentation Perspective in China—Evidence From a Three-Stage DEA Model

Abstract

Under both Chinese-style fiscal decentralization (vertical competition) and promotion tournament systems (horizontal competition), the economic development system used by the government determines whether local government competition significantly influences green total factor productivity (GTFP). Moreover, market segmentation, an important strategic tool for local government competition, will significantly impact GTFP because of the implied changes in production efficiency and blocked factor flows. This study applies GMM and the mediation effect model to explore the relationship between local government competition and GTFP from the market segmentation perspective using statistical data from 30 provinces from 2006 to 2017 in China. Overall, our results demonstrate that local government competition significantly inhibits GTFP promotion. Local government competition also has a negative impact on GTFP by promoting market segmentation. As a mediating variable, the market segmentation coefficient was statistically significant. Considering regional heterogeneity, in the eastern region, local government competition has no significant inhibitory effect on GTFP. Moreover, market segmentation has no intermediary effect. In the central and western regions, GTFP remains significantly inhibited by local government competition, and the mediation effect of market segmentation is significant. Finally, our empirical results are robust.