Impacts of Dynamic Agglomeration Externalities on Eco-Efficiency: Empirical Evidence from China

Ecological efficiency (eco-efficiency) reflects the synergetic degree of the development of resource, economic, and environmental systems. This paper measures urban eco-efficiency based on a nonconvex metafrontier data envelopment analysis (DEA) approach using data from 191 cities in China during the years of 2003 to 2013. In particular, the impacts of dynamic agglomeration externalities on urban eco-efficiency are investigated. Our empirical results show that eco-efficiency decreased from 2003 to 2013, and its spatial distribution demonstrates significant regional heterogeneity. Additionally, there exists an inverted U-shape relationship between dynamic externalities, including Marshall-Arrow-Romer (MAR), Jacobs and Porter externalities, and eco-efficiency. We also find that eco-efficiency can be enhanced by strengthening environmental regulations, optimizing industrial structures, and improving technological capacity. These findings are robust to alternative eco-efficiency measures, model specifications, and estimation approaches. Furthermore, we discuss related policy implications of our research results.