Does the Construction of a Water Ecological Civilization City Improve Green Total Factor Productivity? Evidence from a Quasi-Natural Experiment in China.

Taking Water Ecological City Pilot (WECP) policy as a quasi-natural experiment, this paper adopts the PSM-DID method to investigate the impact of the WECP policy on the green total factor productivity (GTFP) of China's prefecture-level cities. The results show that the implementation of the WECP policy significantly inhibits the improvement of GTFP. Furthermore, we find the implementation of the WECP policy has squeezed out government technological expenditures to some extent and aggravated the compliance cost of enterprises, which has not caused the "innovation compensation effect", thus failing to improve GTFP. The heterogeneity analyses show that the policy effects vary with the imbalance of China's regional development and resource endowments. Developed regions can better overcome the possible negative impact that comes with policy implementation. Governments need to formulate different policy strategies and plans from an overall macro perspective.