Pathway to green growth: A panel-ARDL model of environmental upgrading, environmental regulations, and GVC participation for the Chinese manufacturing industry

Abstract

Since the opening up of China, its manufacturing sector contributed significantly toward economic development on one hand and caused elevated environmental pollution and heavy resource consumption problems on the other hand. Green productivity is an essential means of addressing environmental problems and promoting sustainable environmental performance and long-term economic growth. When the factors affecting the green total factor energy productivity (GTFEP) are studied in recent years, the hitherto literature lacks the relationship between GTFEP, environmental regulations, and global value chain (GVC) participation. Using GTFEP as a proxy of environmental upgrading for the Chinese manufacturing industry, this study investigates the nexus between the GTFEP, environmental regulation index (ERI), and total production length index (TPLI). Based on panel data 18 industries from 2000 to 2014, the current study employed the panel pool mean group estimators for the auto-regressive distributed lag model (ARDL) and estimated the long-run relationship between variables. Findings revealed the positive effect of ERI and GVC participation (TPLI) on the GTFEP of the Chinese manufacturing industry. Furthermore, pairwise panel causativeness analysis indicated unidirectional causality between GTFEP and ERI, running from GTFEP to ERI. Based on research findings, some conclusions and policy implications are derived, such as strict enforcement of environmental regulations, industry-specific policies, promotion of clean energy resources, and acceleration of the country’s further opening-up and reforms. All of these will help promulgate the GTFEP and environmental upgrading of the Chinese manufacturing sector, thus leading to sustainable economic development decoupled from environmental pollution.