Urban sprawl and firm green total factor productivity: Evidence from China

Abstract

Based on corrected nighttime light data and firm-level data from 1998 to 2010, we use an urban sprawl index that properly captures the subtle differences in density distribution within cities, extend a hyperbolic distance specification within a parametric stochastic framework to the analysis of firm green total factor productivity (GTFP), and examine the impact of urban sprawl on firm GTFP. The empirical results show that urban sprawl has a significant negative impact on GTFP. Our results are robust after considering several potential problems. We also examine the possible mechanisms by which urban sprawl affects firm GTFP based on the agglomeration economy perspective. Our findings show that urban sprawl negatively impacts the urban agglomeration economies and hinders the formation of labor pools, intermediate input sharing, and knowledge spillovers, consequently diminishing firm GTFP. Heterogeneity analysis shows that urban sprawl has a more significant impact on small and medium-sized urban firms, firms in low-technology industries, and small and medium-sized firms. The moderating effects reveal that the institutional environment and infrastructure, including transportation infrastructure and information infrastructure, can significantly mitigate the impact of urban sprawl on the firm GTFP.