Does Environmental Policy Stringency Affect the Productivity of the Industrial Sector in China? An Empirical Analysis of the Porter Hypothesis

This paper focuses on the effects of environmental policy stringency (EPS) on the total factor productivity (TFP) growth of firms, which is an extension of the Porter Hypothesis (PH). PH states that strict environmental regulations can promote enterprise innovation and improve enterprise productivity. To test this, the paper uses the word frequency of the keyword in the government report of China from 2010-2020 to test the EPS and chooses the TFP of firms from 2010-2020 as the indicator of the change in productivity of enterprises. The paper also uses panel data methods and ordinary least squares to test the relationship between EPS and TFP. In terms of policies, the national government should consider the economic gap between different regions and the different pollution levels between different companies.