The Influence of Enterprises' Bargaining Power on the Green Total Factor Productivity Effect of Environmental Regulation-Evidence from China

In response to the ecological and environmental problems caused by high energy consumption and pollution, Chinese governments have raised their concerns and tighten the regulations. Even though local governments have achieved certain degree of success during policy implementation, it is still far from realizing the ultimate goal. Our study fills the gap in the existing literature by exploring the dynamic effects of environmental regulations on enterprises' green total factor productivity (GTFP) from the perspective of enterprise bargaining power. With data obtained from the industrial pollution database and the Chinese industrial enterprise database, we calculated the GTFP at enterprise level using the Luenberger productivity index. The results from balanced panel data models show that environmental regulations would have negative impacts on enterprise's GTFP in the short run. However, in the long run, the implementation of environmental policies would achieve the win-win goal in terms of enterprises competitiveness and environmental protection. In addition, indicated by industrial output, tax revenue and number of employees, enterprise bargaining power could weaken the dynamic effects of environmental regulations. Moreover, state ownership, local official changes and weak political constraints would enhance enterprise's bargaining power and thus reduce the dynamic effects. By focusing on the enterprise's bargaining power and its heterogeneous factors during policy implementation, our study provides implications for mitigating distortions and improving GTFP.