Quantifying the Effectiveness of Environmental Regulations on Green Total Factor Productivity: Evidence Based on China’s Environmental Protection Interview Program

The effectiveness of environmental regulations on green total factor productivity (GTFP) is controversial, and the mechanisms of the relationship between environmental regulation and GTFP are unknown. In this article, we take advantage of the Environmental Protection Interview (EPI) program—the harshest environmental monitoring program in Chinese history—to carry out a natural experiment to estimate the effect of environmental regulation on GTFP. Applying a time-varying difference-in-differences model based on city panel data from 2003 to 2018 in China, we determined that the EPI can lead to an average GTFP promotion of 35.6%, but the effect of the EPI is not consistent in the long term. A heterogeneity analysis documented that the effect of the EPI on GTFP is more significant in cities with low initial GTFP levels and low economic levels. A mechanism analysis showed that the EPI increases GTFP, basically, through technical creativity and industrial structure upgrading.