Productivity Growth-Accounting for Undesirable Outputs and Its Influencing Factors: The Case of China

Presently, China’s social development is facing the dilemma of supporting economic growth and reducing emissions. Therefore, it is crucial to analyse productivity growth and examine its relationship with influencing factors in China. This study evaluated the total factor productivity (TFP) growth of 30 provinces in China by adopting the Malmquist-Luenberger (ML) productivity index and incorporating undesirable outputs from 2011–2014. Then, a Tobit regression model was employed to explore the factors that influence China’s TFP growth. The results show that the average annual growth of the Malmquist-Luenberger productivity index was lower than that of the traditional Malmquist (M) productivity index growth during the research period. The findings reveal several key conclusions: First, the true TFP growth in China will be overestimated if undesirable outputs are ignored. Second, technical changes are the main contributor to TFP growth. Third, there are huge regional disparities of productivity growth in China. Fourth, coal intensity, environmental regulations, and industrial structure have significantly negative effects on productivity growth, while real per capita gross domestic product (GDP) and foreign direct investment (FDI) have strongly positive effects on productivity growth