DOES ENVIRONMENTAL REGULATION INFLUENCE INDUSTRIAL PRODUCTIVITY IN CHINA——The Empirical Test Based on DEA and Co-integration Analysis

This paper applies DEA to measure total factor productivity(TFP) on China's industrial sector during 1996—2007,then tests the relationship between environmental regulation and TFP.The results show that:(1)there is a co-integration relationship between environmental regulation and TFP;(2)environmental regulation is Granger-cause of TFP,with the increasing of time lag,such cause is more significant;(3) environmental regulation's positive promotion to TFP is much more obvious in long run than that of in short run.Therefore,the government should increase the strength of environmental regulation properly and optimize the forms of environmental regulation,thus to induce the effect of innovative compensation,and realize the win-win situation between the protection of environment,the improvement of productivity and the increase of economy.