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ORIGINAL RESEARCH
Heterogeneous Environmental Regulation,
Foreign Direct Investment and Green Total Factor
Productivity: An Empirical Study Based
on Provincial Panel Data of China
1
School of Economics, Hangzhou Dianzi University, Hangzhou 310018, China
Submission date: 2024-02-01
Final revision date: 2024-04-18
Acceptance date: 2024-04-27
Online publication date: 2024-09-16
Publication date: 2025-01-28
Corresponding author
Pol. J. Environ. Stud. 2025;34(3):2431-2448
KEYWORDS
TOPICS
ABSTRACT
Foreign Direct Investment (FDI) is a double-edged sword, promoting the economic growth of host
countries while also bringing severe environmental issues. The implementation of different types of
environmental regulations and the inflow of FDI both impact the growth of green total factor productivity
(GTFP) in host countries. How to cope with the relationship between these three factors is vital for
developing countries. This paper utilizes panel data from 30 provinces in China for the period of 2005-
2020 to analyze the effects of command-and-control, market-incentive-based, and public voluntary
environmental regulations on GTFP at the national level and the coastal and inland levels. Furthermore,
a stepwise regression approach is employed to explore the moderating effect of FDI on the relationship
between environmental regulation and GTFP. The findings provide insights into the coordinated
development of the environment, FDI, and the economy. The results indicate that: Firstly, at the national
level, the three types of environmental regulations have different effects on GTFP in China. Commandand-
control regulation inhibits GTFP growth, market-incentive-based regulation promotes GTFP growth,
and public voluntary environmental regulation shows no significant impact on GTFP. Additionally, FDI
has a significant moderating effect on both command-and-control and market-incentive-based regulations
with GTFP, strengthening the negative relationship between command-and-control regulation and GTFP
and weakening the positive relationship between market-incentive-based regulation and GTFP. Secondly,
at the coastal and inland levels, command-and-control regulation inhibits the growth of GTFP in inland
areas, while market-incentive-based regulation promotes the growth of GTFP in coastal and inland regions.
Public voluntary regulation has no significant impact on GTFP in coastal areas but has a negative effect
on GTFP in inland areas. Besides, there is heterogeneity in the moderating effect of FDI between the three
types of environmental regulations and GTFP.
CONFLICT OF INTEREST
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
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