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Does FDI quality boost the city-level green total factor productivity in the Yangtze River Delta, China?

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  • Huiying Zhou

    (Nanjing Agricultural University)

Abstract

The transformation of developed urban agglomerations in developing countries hinges on the development of green economic performance, especially in the context of substantial foreign investment. Using panel data from 41 prefecture-level cities in the Yangtze River Delta from 2003 to 2018, this study explores the effects of foreign direct investment quantity (SFDI) and quality (QFDI) on green total factor productivity (GTFP) through a dynamic spatial Durbin model. The results show a positive relationship between QFDI and city-level GTFP, along with significant spatial spillover effects, suggesting that high-quality FDI contributes to GTFP growth in neighboring regions with comparable geographic and economic characteristics. Conversely, FDI quantity has negative spatial effects on GTFP in local cities. Decomposition of spatial effect further reveals that both SFDI and QFDI generate stronger long-term benefits for GTFP growth. Heterogeneity analysis with different regional GTFP reveals that the upgrading effect on GTFP of FDI (both SFDI and QFDI) is greater in cities with higher green total factor productivity. Finally, the relationship between FDI and GTFP exhibits a single threshold effect based on human capital and a double threshold effect based on R&D investment. Thus, enhancing FDI-GTFP synergy necessitates not only a strategic approach to FDI quality enhancement but also the establishment of balanced environmental regulations.

Suggested Citation

  • Huiying Zhou, 2025. "Does FDI quality boost the city-level green total factor productivity in the Yangtze River Delta, China?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 74(3), pages 1-25, September.
    • Handle: RePEc:spr:anresc:v:74:y:2025:i:3:d:10.1007_s00168-025-01412-3
    DOI: 10.1007/s00168-025-01412-3
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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