The impact of production factor distortion on total factor energy productivity: insight from China's region level.

ABSTRACT

Clarifying the impact of production factor distortion on total factor energy productivity (TFEP) is a key approach to promote production greenization at the region level. To achieve it, this paper develops a theoretical model to bridge production factor distortion and TFEP with China's four regions as the investigated object based on provincial data from 2003 to 2017. Empirical results show that there exist obvious production factor distortions in China's four regions, and such distortions significantly negatively influence the volatility of TFEP as a whole. Specifically, the allocation of production factors including skilled labor in Eastern and Northeastern China as well as capital input in equipment purchase sector in Central and Western China can significantly improve regional TFEP. What's more, distortions of quite a few production factors including skilled labor in Central and Western China, unskilled labor in four regions, and capital input in some industrial sectors in Central and Northeastern China can all hinder the growth of regional TFEP. Therefore, in order to improve regional TFEP in China and reduce factor distortions, the government need to focus more on the input structure of these production factors that have negative impacts on TFEP, and then promote the institution reform towards the high-quality economy growth mode.