Green efficiency loss caused by economic growth goals: Evidence from an emerging economy

Economic growth goals (EGGs) not only serve as a guiding force but also exert a substantial influence on the economic governance of local authorities, subsequently impacting the advancement of urban green economy. Based on the panel data of 285 cities in China from 2003 to 2018, we examine the effect of EGGs on Green Total Factor Productivity (GTFP). It is found that a high EGG has a pronounced inhibitory influence over urban GTFP. The more local governments strive to achieve the EGG, the more significant adverse effects their actions impose on urban GTFP. The soft-constraint form of the EGG mitigates the growth pressure of a high EGG on local governments, while the “layers of overweight” of EGG, divorced from the reality of local economic development, yields adverse consequences on urban GTFP. Mechanism analysis indicates that a high EGG leads to “short-sighted” behaviors, as well as a preference for self-interested investment by local governments, which reduces the fiscal expenditure on science and technology. This causes urban industries to be locked into low-end sectors and entrenches an extensive development model that can restrain urban GTFP. Environmental regulations may mitigate the inhibitory effect of high EGGs on urban GTFP. In addition, high EGGs not only inhibit the improvement in GTFP within the city itself, but also suppress that in adjacent cities and other cities in the province, which confirms the policy diffusion theory. We provide empirical evidence that clarifies the relationship between horizontal growth competition among local governments and the development of green economy in a system of centralization.