title: Firm productivity, pollution, and output: theory and empirical evidence from China.
abstract: Using a theoretical model, this paper argues that as firm productivity increases, there is a decrease in firm-level pollution intensity. However, as productivity increases, firms tend to increase their aggregate output, which requires the use of additional resources that increase pollution. Hence, an increase in productivity results in two opposing effects where increased productivity may in fact increase pollution created by a firm. We describe the joint effect of these two mechanisms on pollution emissions as the "productivity dilemma" of pollution emission. Based on firm-level data from China, we also empirically test this productivity dilemma hypothesis. Our empirical results suggest that, in general, firm productivity has a positive and statistically significant impact on pollution emission in China. However, the impact of productivity on pollution becomes negative when we control for increases in firm output. The empirical evidence also confirms the positive influence of productivity on output, which suggests that the main determinant of pollution is the firm's output. The empirical results provide evidence of the existence of, what we describe as, the productivity dilemma of pollution emission.
authors.affiliation: School of Economics, Shandong Youth University of Political Science, No.16199 Jingshi Road, Jinan, 250014, Shandong, People's Republic of China. tangerzi_sdyu@126.com.
authors.forename: Erzi
authors.initials: E
authors.lastname: Tang
authors.affiliation: School of Business, University of Western Sydney, Locked Bag 1797, Penrith, NSW, 2751, Australia.
authors.forename: Jingjing
authors.initials: J
authors.lastname: Zhang
authors.affiliation: Faculty of Management and Economics, Dalian University of Technology, No.2 Linggong Road, Ganjingzi District, Dalian, 116023, Liaoning, People's Republic of China.
authors.forename: Zulfiqar
authors.initials: Z
authors.lastname: Haider
mesh_terms: D002681:China; D004784:Environmental Monitoring; D004787:Environmental Pollution; D007220:Industrial Waste; D008962:Models, Theoretical
chemical_list: D007220:Industrial Waste
keywords: Firm heterogeneity; Pollution emission; Productivity dilemma