Green Total Factor Productivity in Industrial Economics

Green total factor productivity (GTFP) captures the efficiency with which all inputs—labour, capital, energy—and outputs, including undesirable pollutants, are transformed within industrial processes. By integrating resource use and environmental impacts into conventional productivity analysis, GTFP offers a holistic measure of sustainable performance. In industrial economics, this metric is central to assessing decoupling economic growth from environmental degradation, guiding both corporate strategy and policy design. Methodologically, GTFP studies often employ data envelopment analysis or parametric approaches with directional distance functions and Malmquist–Luenberger indices to track performance over time and across regions. Decomposition of GTFP into technical efficiency change and technological progress yields insights into whether gains stem from better resource utilisation or innovation. Empirical work has spanned national to subnational contexts, highlighting the roles of environmental regulation, technological spillovers, foreign investment and industry structure. Collectively, these contributions inform measures to foster low-carbon industrial transformation and achieve international climate targets.

Research from Nature Portfolio

Recent studies have applied global Malmquist–Luenberger analysis to major urban industrial agglomerations, such as those in the Pan-Pearl River Delta. These assessments reveal sustained growth in GTFP driven principally by technological progress and scale efficiency effects, alongside improvements in technical efficiency. Decomposition analyses indicate that advances in pure technical efficiency and scale-driven technological change have become increasingly important in less developed subregions, supporting balanced regional development. Econometric modelling within these contexts underscores the significance of integrated markets, technology sector expansion in core cities and the diffusion of innovation spillovers in elevating green productivity across industrial clusters.

Green Total Factor Productivity in Industrial Economics publication trend

The graph below shows the total number of articles in green total factor productivity in industrial economics across all publications each year (not limited to Nature Index journals).

Technical terms

Green Total Factor Productivity (GTFP): A measure of output growth adjusted for all inputs and environmental undesirable outputs, reflecting sustainable efficiency.

Malmquist–Luenberger Index: A productivity index that extends the Malmquist index to account for undesirable outputs within a directional distance function framework.

Directional Distance Function (DDF): A method in production analysis that measures distance from an observed production point to a frontier in a specified direction of desirable output increase and undesirable output reduction.

Spatial Spillover Effects: Interregional influences whereby technological advances or policy measures in one region affect productivity outcomes in neighbouring areas.

References

1. Green Total Factor Productivity Growth and Its Determinants in China’s Industrial Economy. Sustainability (2018).
2. Green development of China’s Pan-Pearl River Delta mega-urban agglomeration. Scientific Reports (2021).
3. Impact of Industrial Structure Upgrading on Green Total Factor Productivity in the Yangtze River Economic Belt. International Journal of Environmental Research and Public Health (2022).
4. Can FDI facilitate green total factor productivity in China? Evidence from regional diversity. Environmental Science and Pollution Research (2022).
5. Intelligence and Green Total Factor Productivity Based on China’s Province-Level Manufacturing Data. Sustainability (2021).