Impact of market misallocations on green TFP: evidence from countries along the Belt and Road

Zhang, Qing; Yan, Fenghao; Li, Ke; Ai, Hongshan

Impact of market misallocations on green TFP: evidence from countries along the Belt and Road

2019

Zhang, Qing | Yan, Fenghao | Li, Ke | Ai, Hongshan

Based on the idea of a “Community of Human Destiny,” the Chinese government proposed the “Belt and Road” initiative, and clearly proposed to promote green development and strengthen ecological environmental protection. However, a considerable number of countries are resource-rich economies with serious market misallocations. Using the stochastic frontier analysis (SFA) combined with the directional distance function (DDF) framework, this paper measures the green total factor productivity (GTFP) and its items (i.e., technical change and efficiency change) of 33 countries along the Belt and Road in 1995–2012, and then the impact of market misallocations on GTFP is analyzed. The following conclusions are drawn: (1) The main driving force for GTFP promotion in Asian countries came from technical change, while in European countries, it came from efficiency change. (2) Market misallocations had significantly hindered the GTFP of these economies. Countries with greater market misallocations have smaller GTFP. (3) Results based on counterfactual measures showed that GTFP could be increased by up to 4.04% and the average can be increased by 1.24% after eliminating market misallocations.

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