Resources Policy 85 (2023) 103896

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Resources Policy
journal homepage: www.elsevier.com/locate/resourpol

Does the rise of China promote the sustainable development of OECD

countries? A geopolitical perspective
Zhiyang Shen a, Yuntian Zhao a, Fatma Guneri b, Yiping Yang c, Songkai Wang a, Haiyan Deng c, *
a
School of Management and Economics, Beijing Institute of Technology, 100081, Beijing, China
b
Hemisf4ire Design School, Université Catholique de Lille, 59800, Lille, France
c
School of Humanities and Social Sciences, Beijing Institute of Technology, Beijing, 100081, China

A R T I C L E I N F O A B S T R A C T

Keywords: Trade tensions between China, the United States, and European nations have continually changed in recent years.
Geopolitical conflict Geopolitical cooperation and sustainable development have long been major considerations for all nations. Due
Resources allocation to its industrial prowess in manufacturing and its leading import-export merchandising activities, China is an
Green productivity
important partner for many nations on the international market. The goal of this study via trade and investment
Foreign direct investment
International trade
between China and the Organization for Economic Co-operation and Development (OECD) nations is to better
understand China’s influence on green growth and to support policies that increase green productivity. This
study assesses green productivity in 38 Organization for Economic Co-operation and Development (OECD) na­
tions from 2000 to 2019 using the by-production model and the Luenberger-Hicks-Moorsteen productivity in­
dicator. Analysis of the effects of trade and investment with China follows. The empirical findings first
demonstrate that from 2000 to 2019, green production increased in OECD nations. Second, growth in green
productivity is boosted by trade and investment with China. This paper makes the case that it is feasible to
achieve sustainable development while minimizing geopolitical risk. This study offers policy recommendations
to support green growth and briefly identifies the limits and potential directions for further research.

1. Introduction provide official recommendations to encourage the adoption of green

The critical need for environmental conservation and long-term
sustainable development has given rise to the idea of “green growth.”
Developed nations began concentrating on green growth before devel­
oping nations (Tawiah et al., 2021). Countries in the Organization for
Economic Co-operation and Development (OECD) are leaders in sus­
tainable development. In June 2009, OECD countries defined green
growth as “fostering economic growth and development while ensuring
that natural assets continue to provide the resources and environmental
services on where our well-being relies (OECD, 2011).”
This joint statement demonstrated that OECD nations have priori­
tized green growth. Numerous studies have been conducted in response
to green development policies and initiatives. Energy efficiency, envi­
ronmental regulation, and green innovation are the three main strate­
gies put out and commonly referenced by academics as ways to achieve
green growth (Ganda, 2019; Hashmi and Alam, 2019; Hassan et al.,
2022; Liu et al., 2020; Z. Wang and Zhu, 2020). OECD organizations also
growth ideas and practices in several industries (Green Growth, 2011;
Food and Agriculture, 2011; Green Growth in Fisheries and Aquacul­
ture, 2015). These publications go beyond academic research.
China’s trade and investment are essential to the green growth of
OECD nations. As a significant player in the global capital and goods
markets, China first exerts increasing economic influence on the rest of
the world. The growing value of bilateral commerce between China and
OECD nations from 2000 to 2019 is shown in Fig. 1, indicating China’s
rapid economic growth and transformation into a major trading nation.
Fig. 2 demonstrates that between 2000 and 2019, China’s foreign direct
investment (FDI) into and out of OECD nations dramatically grew. The
rise of China among the top rising nations has a significant impact on the
nations with whom it trades and invests. As noted by Branstetter and
Feenstra (2002), China’s explosive economic rise had a significant
impact on the entire world. As a result of China’s rise, other nations have
more trade opportunities and financial support (Tang and Gyasi, 2012).
Global demands on resource-rich nations, particularly the largest

* Corresponding author.
E-mail addresses: zhiyang86@163.com (Z. Shen), 1710313@i.pkuschool.edu.cn (Y. Zhao), fatma.guneri@univ-catholille.fr (F. Guneri), yyiping@foxmail.com
(Y. Yang), songkai0915@163.com (S. Wang), mariadeng716@126.com (H. Deng).

https://doi.org/10.1016/j.resourpol.2023.103896
Received 8 February 2023; Received in revised form 23 May 2023; Accepted 1 July 2023
Available online 3 August 2023
0301-4207/© 2023 Published by Elsevier Ltd.
Z. Shen et al.
Fig. 1. Bilateral trade value between OECD countries and China.
Fig. 2. China’s inward and outward foreign direct investment with
OECD countries.
economy (such as China), benefit the local economy and improve the
financial standing of its trading and investment partners. In spite of this,
environmental problems are also an issue (Qian et al., 2021; Umar et al.,
2021). A nation with lax environmental regulations would struggle with
sustainability. It is still unclear whether China’s economic resources
support the economies of other nations.
In view of the importance of China’s trade and investment, it is of
great significance to examine the impact of China’s trade and invest­
ment on the green development of OECD countries. However, existing
research on green growth in OECD countries mainly focuses on the in­
terrelationships among developed countries, rather than relations with
China. For example, many studies have estimated and disaggregated
green growth in OECD countries using different models (Gavurova et al.,
2021; Hua and Wang, 2023; Mavi and Mavi, 2019; Shen et al., 2017;
Woo et al., 2015a). Moreover, the impact of environmental regulations,
energy structure changes, and green innovation on green growth has
been quantitatively measured (Behera and Sethi, 2022; Dar and Amir­
Khalkhali, 2002; Khattak and Ahmad, 2022; Mulder and de Groot, 2012;
Wang et al., 2019). However, few of these studies attribute or link green
growth in OECD countries to developing countries (such as China).
Second, compared with many studies on China’s impact on sustainable
growth in developing countries, some studies on China’s impact on
developed countries are relatively insufficient, and most of them are
limited to the energy field. For example, some studies examined the
impact of China’s development influence BRI countries’ green devel­
opment (Jiang et al., 2021; Tian et al., 2019; Wang and Lin, 2022).
Nevertheless, studies of how developing countries influenced developed
2
Resources Policy 85 (2023) 103896
countries are scarce.
To fill the research gap, this study focuses on how China’s trade and
investment affect green growth in OECD countries. Among various
proposed indicators (e.g. Malmquist index, Luenberger productivity
index, etc.), the Luenberger-Hicks-Moorsteen index (LHM) is estimated
to measure green growth in OECD countries. Under the LHM produc­
tivity indicator framework, the total green factor productivity (GTFP) is
estimated first, and then further decomposed into technical efficiency
change, technological progress and scale efficiency change. Next,
econometric methods are employed to find out how trade and invest­
ment from China impact the GTFP of OECD countries.
The remaining parts of this paper unfold as follows: Section 2 is the
literature review. Section 3 proposes a green productivity model that
can derive the aggregate production frontier for whole OECD countries
and split the three components of green productivity growth. The data
sources are described in Section 4, together with the findings and
comments on the empirical results. Section 5 provides a conclusion of all
this work and a brief discussion of the limitations of this work and po­
tential areas for future investigation.
2. Literature review
Given the importance of green growth, it is crucial to develop a
framework that provides appropriate information to support green
policy analysis and green growth progress assessment (Stiglitz et al.,
2018). The development and implementation of such a framework re­
quires a comprehensive understanding of the components and de­
terminants of green growth. Compared to short-term economic growth,
green growth takes into account environmental quality and resource
productivity, reflecting that economic performance is distorted by
ignoring environmental externalities. Chung et al. (1997) argued that
gross domestic product (GDP) is not a perfect indicator to measure cit­
izens’ well-being, as GDP growth sometimes depletes natural resources
and sustainability. Therefore, green indicators of environmental sus­
tainability have become a heated topic in the recent literature (Cárdenas
Rodríguez et al., 2018). Zofio (2007) presented a unified approach to
decomposing the Malmquist Productivity Index, which is commonly
used to assess green growth. Du et al. (2018) modified this Malmquist
productivity index to assess environmental productivity performance in
China. Hatakeyama (2018) developed a conceptual framework that
would fill the gaps in environmental focus and promote consistency in
public policies.
Numerous studies have been conducted to assess green growth in
OECD countries. For example, Yörük and Zaim (2005) constructed an
alternative Malmquist-Luenberger productivity index and reestimated
green productivity growth in OECD countries. Mahlberg et al. (2011)
studied eco-productivity growth in 14 European Union (mainly OECD)
countries and found a positive trend in green productivity. Woo et al.
(2015a) examined the environmental performance of renewable energy
from static and dynamic perspectives in 31 OECD countries and revealed
geographic differences in environmental performance within the OECD.
More recently, Shen et al. (2017) measured green productivity de­
velopments for 30 OECD countries and concluded that technological
advances have driven green productivity growth in OECD countries.
Significant green growth, measured by green indicators, has been
identified in this research.
In addition, scientists grouped the factors contributing to green
growth in OECD countries into three categories: energy efficiency,
environmental regulation and green innovation. Camarero et al. (2013)
assessed eco-efficiency in OECD countries and examined a
club-convergent trend of sustainability indices in OECD countries from
1980 to 2008. Mavi and Mavi (2019) used data from the OECD to
emphasize how energy efficiency contributes to environmental sus­
tainability in a circular economy country in 2012–2015. Can et al.
(2021) empirically confirmed that green openness stimulated environ­
mental sustainability and green growth in OECD countries from 2003 to
Z. Shen et al.
2016. Dabbous and Tarhini (2021) quantitatively assessed the potential
impact of innovative sharing economy on green economic development
and energy efficiency in OECD countries. Overall, previous studies
examining the green growth of OECD countries have mainly focused on
the influencing factors within OECD organizations, with little attention
paid to the impact of potential factors influencing their green develop­
ment from an international perspective. Overall, previous studies
examining the green growth of OECD countries have mainly focused on
the influencing factors within OECD organizations, with little attention
paid to the impact of potential factors influencing their green develop­
ment from an international perspective.
China’s huge volume of trade and investment is likely to impact on
the green growth of OECD countries, but existing research is limited to
its impact on the development of developing countries. One of the most
popular research topics was China’s influence on the development of the
Belt and Road Initiative (BRI) countries, as the Chinese government
encouraged them to set up and invest in the BRI countries. For example,
research projects registered in the China Knowledge Resource Integrated
Database on BRI issues were increased by 21 times in three years, from
1012 in 2014 to 21216 in 2017 by searching the keyword “BRI”. Apart
from the BRI countries, some research papers deal with the impact on
developing countries. For example, Tang and Gyasi (2012) analyzed the
impact of China’s foreign direct investment on Ghana’s development
and concluded that investments from China have a positive impact on
the local economy and create jobs. He (2013) studied the impact of
imports from China on exports of manufactured goods from Sub-Saharan
Africa, which served as an indicator of manufacturing performance. He
generalized that the increase in trade between Africa and China is
mutual and has a particularly positive impact on economic development
in Africa.
In contrast to the booming number of studies on developing coun­
tries, few studies have focused on China’s impact on the development of
developed countries (e.g. OECD countries). Previous studies have
focused on how developed countries are fueling China’s growth. How­
ever, as investment from China increases, it is also important to examine
how China is affecting developed countries. Kvedaras and
Cseres-Gergely (2021) argued that the shrinking manufacturing sector,
rising unemployment rate, improving manufacturing exports, and
growing demand for a well-educated, high-skilled workforce are the
channels for China’s trade expansion to worsen income inequality in
Europe. However, this study only emphasized the competitive effect
between China and Europe, ignoring that China’s trade expansion also
purposefully created a market and offered cheap products to Europe
(Wang, 2020).
With regard to China’s direct impact on developed countries, Conrad
and Kostka (2017) qualitatively analyzed Chinese investments in the
European energy sector and pointed to the significant benefits brought
by China’s new role as a global investor with significant economic
benefits and political partnership. Liedtke (2017) examined Chinese
energy investments in Europe in 2008–2015 and concluded that the
proposed bilateral investment agreement between China and the E.U.
would create a unified investment environment across the continent and
bring mutual economic benefits to both sides. Previous literature has
focused on trade competition between China and developed countries,
particularly in manufacturing, and examined China’s investments in the
energy sector in developed countries.
How developing countries affect developed countries in the context
of North-South trade and investment is complex. Most research has
focused on North-South trade and investment, and northern countries’
productivity is either constant or endogenously influenced by northern
countries’ R&D behavior (Chui et al., 2002; Dinopoulos and Segerstrom,
2006). Copeland and Taylor (1994) and Meng et al. (2018) discuss
environmental issues in North-South trade and investment. Meng et al.
(2018) argued that by shifting production of energy- and
3
Resources Policy 85 (2023) 103896
resource-intensive products to developing countries, developed coun­
tries lowered their carbon emissions. Copeland and Taylor (1994)
developed a mathematical model of North-South trade and confirmed
that increasing North-South trade volume reduces pollution in the North
but increases global pollution. However, this effect would diminish with
increasing human capital in the South. Few papers have attempted to
examine how developing countries relate to a green productivity shift
that includes pollution. Little is known about the link between China’s
trade and investment and green growth in OECD countries.
In summary, despite the multitude of studies assessing green growth
in OECD countries, few studies have linked green growth in OECD
countries to factors outside the organization. Second, studies on how
China influenced other nations’ green growth were lacking and focused
heavily on developing countries. Third, there have been limited studies
of how developing countries affect advanced economies. This paper
aimed to fill this gap by examining how China impacted advanced
economies. Compared to previous studies, the incremental contributions
of this work are as follows: 1) reassessing the green productivity of
OECD countries using the Luenberger-Hicks-Moorsteen indicator and
decomposing into technical efficiency change, technical progress and
scale efficiency change; 2) Studying the impact of China’s investment
and trade on the GTFP of OECD countries to check whether China has a
positive impact on the green growth of OECD countries or not.
3. Methodology
3.1. Measurement of GTFP
Green productivity is becoming a dominant indicator for assessing
sustainable development as it measures countries’ environmental
friendliness and efficiency. The treatment of undesirable outcomes such
as emissions or pollution is crucial for green productivity, otherwise it is
only an indicator of productivity (Halkos and Petrou, 2019). A
by-production model first reported by Murty et al. (2012) was
employed. The by-production model assumes that the technologies of
green production and polluting production are separable compared to
other methods of incorporating unwanted outputs. (i.e. treating un­
wanted outputs as inputs, linearly transforming unwanted outputs, etc.)
Let a production set (T) represent the production technology of the
OECD countries. Suppose that there are K countries. And each country
consists of a decision-making unit (DMU). Each country consumes N + P
inputs (u) and produces M desirable (v) and J undesirable outputs (w).
Among inputs, suppose that there are N nonpolluting (clean) inputs (un )
and P polluting (dirty) inputs (up ). The difference between these two
types of inputs is that the former promotes the production of desirable
outputs, whereas the latter help produce both desirable and undesirable
outputs. Because of the assumption of separable technologies of
nonpolluting production and polluting production, the production
technology T can be divided into two sub-technologies: economic sub-
technology (T1 ) and environmental sub-technology (T2 ). The eco­
nomic sub-technology is the production process focusing on the desir­
able outputs, while the environmental sub-technology models the
process of generating pollution. Additionally, several assumptions on
the characteristics of T1 and T2 are generally accepted. It is assumed that
T1 satisfy strong disposability and T2 is costly disposability. A more
detailed explanation of economic assumptions can be found in Murty
et al. (2012), Baležentis et al. (2021), and Shen et al. (2022). Corre­
sponding to T1 and T2 , let f( ⋅) and g( ⋅) be continuously differentiable
functions that represent the production functions of economic
sub-technology and environmental sub-technology. f( ⋅) ≤ 0 represents
that the inputs, un and up , can generate v. Similarly, g( ⋅) ≤ 0 indicates
polluting inputs up can generate w. Then the production technology set
can be written as:
Z. Shen et al. Resources Policy 85 (2023) 103896

T = T1 ∩ T2 problem. A novel approach to converting efficiency into productivity is

{ }
= (un , up , v, w) ∈ RN+P+M+J : (un , up ) can produce v, up can generate w , the LHM indicator, which was first proposed by Briec and Kerstens
+
{ n p
T1 = (u , u , v) ∈ RN+P+M
}
: f (un , up , v) ≤ 0 , (2004) as a GTFP measure. The essential idea of calculating productivity
is to compare the efficiency of a given DMU with other DMUs from
+
{ p P+J
}
T2 = (u , w) ∈ R+ , g(up , w) ≤ 0 .
different time periods. The LHM indicator has some advantages
(1) compared to technical productivity indicators. The strength of the LHM
From an economic perspective, an increase in desired outcomes can indicator is that LHM is an additive full GTFP measure. So the LHM
lead to an improvement in social well-being. However, in order to indicator can be expressed by the total input and output change.
achieve the production of desirable outcomes, undesirable outcomes (e. The LHM indicator, in the manner of Ang and Kerstens (2017), is
g. greenhouse gas emissions and pollution) are inevitable, creating employed to break down the change in the GTFP. The metrics of GTFP
negative externalities and affecting social well-being. Since there are change are computed using the distance functions produced by Equation
desirable and undesirable outcomes, it is necessary to assess the trade- (3). Notably, the input and output in certain cases come from distinct
off between economic and environmental development. The direc­ time periods, allowing for measurement of the change in the production
tional distance function is used to determine the improvement potential frontier.
of these evaluated areas, compared to the corresponding production The change in the GTFP is calculated as follows:

⎡ [ t( t t t ) ( )] ⎤
D uk , vk , wk ; 0, gtv , gtw − Dt utk , vt+1 t+1
k , wk ; 0, gv , gw
t+1 t+1
⎢ [ t ( t+1 ) ( )] ⎥
1⎢
⎢− D u , vt , wt ; gt+1 , 0, 0 − Dt utk , vtk , wtk ; gtu , 0, 0 ⎥
⎥
GTFPt,t+1 = ⎢ [ t+1 ( k t+1 k t k t u t t ) t+1
( t+1 t+1 t+1 t+1 t+1
)] ⎥ (4)
2⎢+ D u , v , wk ; 0, gv , gw − D uk , vk , wk ; 0, gv , gw ⎥
⎣ [ t+1 ( t+1k t+1k t+1 ) ( )] ⎦
− D uk , vk , wk ; gt+1 u , 0, 0 − Dt+1 utk , vt+1 t+1
k , wk ; gu , 0, 0
t

limit. The non-radial directional distance function allows for the

simultaneous expansion of desirable outputs and the reduction of un­ The positive value of GTFP indicates improvement in productivity,
desired outputs (Chambers et al., 1996). Let whereas the negative value is deterioration of productivity. The changes
in the use of inputs and outputs capture GTFP.
D(u, v, w; gu , gv , gw ) = max {δ ∈ R+ : (u − δgu , v + δgv , w − δgw ) ∈ T}. (2)
The GTFP can be decomposed into three terms, with each of them
On the right-hand side of Equation (2), the inefficiency score (δ) representing the effects of the technical efficiency change (TEC), tech­
represents the greatest possible increase in the desired outputs and nical progress (T.P.), and scale efficiency change (SEC):
reduction in undesirable outputs in the direction indicated by the
GTFPt,t+1 = TECt,t+1 + TPt,t+1 + SECt,t+1 . (5)
mapping vector (gv , gw ) under the given technology T, which is derived
in Equation (1). If δ = 0 the evaluated country is comparatively efficient To calculate these terms, the directional distance functions can be
and serves as a benchmark among all the DMUs. In computation, the constructed. And similarly, the positivity of these terms means
directional distance vectors (gu , gv , gw ) often take the value of the improvement and the negativity means aggravation. Technical effi­
observation bundle (u, v, w). ciency change means the shift in GTFP caused by improvements or re­
To calculate the function D( ⋅) in Equation (2), Baležentis et al. ductions in the technical efficiency of a given DMU (in our case a
(2021) first applied the linear program: country). This term derives specifically from the relative change in ef­
( ) ficiency between the DMUs. In the case of technical efficiency changes,
Db ua , va , wa ; 0, gav , gaw = max δ
the following calculation is used:
∑
K
[ ( ) ( )]
λk vm,b ≥ vm,a (6)
m,a
s.t. k k + δgv , ∀m = 1, ..., M, TECt,t+1 = Dt utk , vtk , wtk ; 0, gtv , gtw − Dt+1 ut+1 t+1 t+1 t+1 t+1
k , vk , wk ; 0, gv , gw
k=1

∑
K The improvement of technology pushes the production frontier to
λk un,b where it is more efficient for a given amount of time, capital, and
n,a
k ≤ uk , ∀n = 1, ..., N,
k=1
resource as inputs. Due to this movement of the production frontier, the
∑
K
growth of total factor productivity is measured by the technology
λk up,b p,a
k ≤ uk , ∀p = 1, ..., P,
k=1
change part. By considering the distance to frontiers of two consecutive
periods, the technical change part is obtained:
∑
K
σk wj,b j,a j
k ≤ wk − δgw , ∀j = 1, ..., J,
k=1
(3) TPt,t+1
⎡ ( ) ⎤
( )
∑
K
p,b 1⎢ Dt+1 utk ,vtk ,wtk ;0,gtv ,gtw − Dt utk ,vtk ,wtk ;0,gty ,gtw ⎥
σ k uk ≥ up,a
k , ∀p = 1, ..., P, = ⎣
2 t+1
( t+1 t+1 t+1 t+1 t+1
) ( ) ⎦.
k=1
+ D uk ,vk ,wk ;0,gv ,gw − Dt ut+1
k ,vt+1
k ,wt+1
k ;0,gt+1 t+1
v ,g w
∑
K
λk = 1, (7)
Finally, the scale efficiency change is partly a measure of the change
i=1

∑ in total factor productivity. As manufacturing grows closer to the most

K
σk = 1,
i=1 productive scale, scale efficiency worsens. As Equations (6) and (7) give
λk ≥ 0, ∀k = 1, ..., K, the two components of GTFP, the last component is:
σk ≥ 0, ∀k = 1, ..., K,
The final step is to turn the efficiency problem into a productivity

4
Z. Shen et al. Resources Policy 85 (2023) 103896

SECt,t+1 4. Data and result

⎡ ⎤
[ t ( t+1 t+1 t+1 ) ( )]
D uk ,vk , wk ;0,gt+1 4.1. Data
t+1
⎢ v ,gw − D utk ,vt+1
t t+1
k ,wk ;0,gv ,gw
t+1 t+1
⎥
⎢ [ t ( t+1 t t t+1 ) ( )] ⎥
1⎢
⎢− D uk ,vk ,wk ;gu ,0,0 − Dt utk ,vtk ,wtk ;gtu ,0, 0 ⎥
⎥
= ⎢ [ t+1 ( t+1 t t ) ( t t t )] ⎥ . Data from 38 OECD countries from 2000 to 2019 was collected by
2⎢+ D uk ,vk ,wk ;0, gtv ,gtw − D t+1 t
uk ,vk ,wk ;0,gv ,gw t ⎥
⎢
⎣ [ t+1 ( t+1 t+1 t+1 t+1 ) ( t t+1 t+1 t )] ⎦
⎥ the Penn World Table, the International Energy Agency, the Wind
Database and the World Bank (Feenstra et al., 2015). In calculating
t+1
− D uk ,vk ,wk ;gu ,0,0 − D uk ,vk ,wk ;gu ,0,0
GTFP, the data used in this document includes three inputs and two
(8)
outputs. Three inputs were capital stock, labor and energy consumption
(tonnes of oil equivalent). These two outputs are on the one hand the
3.2. Estimation strategy
desired output, the production-side real GDP (output-side), and on the
other hand the undesired output, the carbon dioxide emissions. The
The main purpose of this study is to examine how Chinese trade and
capital stock was determined using the perpetual inventory method at
investment affect green development in OECD countries. To measure the
purchasing power parity in millions of US dollars in 2017. The labor
impact of Chinese investment and trade on sustainable growth in OECD
force was the number of millions employed. Real GDP on the production
countries, the following regressions are estimated:
side (output-side) was at purchasing power parity in billions of US
∑ ∑
GTFPi,t = β0 GTFPi,t− 1 + β1 tradei,t + βXi + ui + εi,t (9) dollars in 2017. Undesirable emissions (carbon emissions) were based
on a sectoral approach from fuel combustion in millions of tons. In the
∑ ∑ regression, data used in this document includes trade volume with
GTFPi,t = γ 0 GTFPi,t− 1 + γ 1 investmenti,t + γXi + vi + μi,t (10)
China, foreign direct investment from China, human capital, private
(household) and government consumption, industrial value added (% of
where i is the country, t is the year. εi,t and μi,t represent the random
∑ GDP), and inflation. Detailed information on each variable is provided in
error terms. The dependent variable GTFPi,t is the accumulated green
Table 1.
total factor productivity measured by the LHM index of the country i
Table 2 shows the descriptive statistics of the variables. Some of the
between time period t and t + 1. Because lagged productivity growth
data on energy use and carbon emissions were not accessible. A linear
may influence current productivity growth, the lagged dependent vari­
∑ interpolation method was applied to meet the computational re­
able GTFPi,t− 1 is included in both Equations (9) and (10) as inde­
quirements of GTFP - panel data compensated for missing entries in
pendent variable. The matrix X is the collection of variables that is not
energy consumption. Specifically, the missing data were interpolated by
the core explanatory variables, including the difference in human cap­
averaging the data from the previous year and the following year.
ital between two consecutive years, consumption, industry structure, the
Table 2 shows that the period 2000–2019 was characterized by an
value-added of the industry, inflation, and the accumulated GTFP of last
overall increasing trend in all three inputs, including capital stock, labor
year. Individual effects are captured by ui and vi respectively in Equa­
input and energy consumption. Capital stock increased at 4.43% per
tions (9) and (10). Correspondingly, β and γ are the collection of their
year, labor at 1.06% per year and energy consumption at 0.59% per
coefficients. Notably, all variables take a logarithm to address the het­
year. With good production, the production-side (output side) GDP
eroskedasticity issue.
showed an average growth rate of 2.91% per year. Meanwhile, the un­
In choosing econometric approaches, this study eliminated addi­
wanted output, CO2 emissions, fell slightly by 0.01% per year.
tional limitations and processed the panel data using pooled ordinary
least squares (OLS). Given the heterogeneity of the country, a fixed ef­
4.2. Empirical results
fects (F.E.) model was then used to study the role of Chinese trade and its
investments in green development in OECD countries.
4.2.1. Green productivity analysis
First, as shown in Table 3, the results indicate that the average GTFP
growth rate in 38 OECD countries was positive at 1.06% per year. T.P.
and SEC contributed 0.93% and 0.59% per year to the total GTFP
change, respectively. However, the average TEC showed a negative
Table 1 trend, falling − 0.46% per year. Fig. 3 shows a trend chart of the average
Variable definitions and Sources. cumulative GTFP and its decomposition indicators, indicating that the
variable measurement source GTFP growth is mainly due to an increase in T.P. and SEC. Therefore, the
cn Capital stock under the perpetual The Penn World
main reasons for GTFP growth were the development of technology and
inventory method at purchasing power Table the pursuit of a more economical scale. The cumulative T.P. experienced
parities in billions 2017 U.S. dollars a downward trend from 2007 to 2010, coinciding with the global
emp Employed labor force (in millions) The Penn World financial crisis, but started to rise steadily thereafter. The development
Table
of science and technology over time allowed countries to become more
energy use Energy use (million tons of oil equivalent). The International
Energy Agency efficient and produce combinations outside of existing production
cgdpo Output-side real GDP at purchasing power The Penn World limits. Conversely, the cumulative TEC fell, suggesting that more
parities in billions 2017 U.S. dollars Table countries were producing a combination that was further from the limit
co2 Carbon emission based on a sectoral The International and less efficient than the benchmarks. The SEC maintained a nearly
approach from fuel combustion in millions Energy Agency
of tons
linear upward trend, suggesting that OECD countries were moving to­
trade Trade volume with China (% of GDP) Wind Database wards more efficient scales of production on average.
investment Investment from China (% of GDP) Wind Database Second, GTFP growth and decomposition varied significantly at the
dhc Change in human capital The Penn World country level, as shown in Fig. 4. Annual GTFP growth rates in OECD
Table
countries mostly ranged from 0.50% to 2.00%, with Estonia registering
consumption Household and governmental The Penn World
consumption Table the highest growth rate at 2.81% per year. In contrast, Iceland recorded
industry industry value added (% of GDP) World Bank Open negative average growth of − 0.93%, the lowest within the OECD group.
Data These significant differences suggest that GTFP growth has not been
inflation The annual growth rate of the GDP World Bank Open homogeneous across OECD countries. Third, 31 of the 38 OECD coun­
implicit deflator Data
tries achieved positive GTFP growth while seven were negative,

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Table 2
Descriptive statistics of the variables in GTFP computation.
variable obs mean std min max growth rate (%)

cn 760 5612.93 10,673.00 55.48 69,059.09 4.43

emp 760 15.38 25.95 0.16 158.30 1.06
energy use 604 143.54 362.99 2.87 2337.00 0.49
Cgdpo 760 1301.83 2835.87 10.72 20,566.03 2.92
co2 722 331.41 866.30 1.86 5776.41 0.02
trade 759 − 3.73 0.86 − 6.27 − 1.61 − 2.17
investment 471 − 9.70 2.45 − 17.86 − 2.67 − 1.13
dhc 722 0.02 0.01 − 0.02 0.05 − 4.28
consumption 760 − 0.30 0.16 − 1.20 − 0.01 1.11
industry 716 3.18 0.22 2.35 3.72 − 0.25
inflation 720 3.03 4.28 − 9.73 52.98 197.57

Table 3
Annual change in the GTFP, TEC, T.P., and SEC (%).
country GTFP TEC TP SEC

Australia 1.73 − 0.42 1.62 0.53

Austria 1.43 − 2.02 3.07 0.38
Belgium 1.79 − 1.92 3.49 0.22
Canada − 0.23 − 1.56 0.52 0.81
Chile 1.20 − 0.40 0.03 1.57
Colombia 2.48 0.59 1.94 − 0.05
Costa Rica − 0.04 0.00 − 3.73 3.69
Czech Republic 1.41 − 0.20 1.88 − 0.27
Denmark 1.64 − 1.29 2.57 0.36
Estonia 2.81 0.88 − 1.40 3.33
Finland 1.18 − 0.51 0.54 1.14
France 0.77 − 0.27 1.22 − 0.18
Germany 1.02 − 0.19 1.32 − 0.12
Greece 0.09 − 2.34 2.28 0.15
Hungary 0.76 − 2.04 0.18 2.62
Iceland − 0.93 0.00 0.49 − 1.42
Fig. 3. The Accumulated GTFP and its Decompositions.
Ireland 2.56 0.00 2.77 − 0.21
Israel 1.06 − 0.32 0.54 0.84
Italy 0.66 − 0.17 0.79 0.04 country saw the largest decline in GTFP, at 0.93% per year. This was
Japan 1.19 − 0.13 1.11 0.21 mainly due to Iceland’s negative SEC of 1.42% per year. During the
Latvia 2.46 1.70 0.60 0.17
period 2000–2019, Iceland’s energy consumption increased annually
Lithuania 2.21 0.97 − 1.00 2.25
Luxembourg 0.59 0.00 − 1.52 2.10 and carbon emissions increased annually, meaning Iceland’s economy
Mexico − 0.10 − 0.33 0.35 − 0.12 evolved towards a less environmentally friendly and efficient scale.
Netherlands 0.50 − 0.97 1.50 − 0.04 These seven countries that experienced negative growth were also
New Zealand 0.88 0.64 − 1.06 1.30 identified in previous research. Wang et al. (2020) reported that Mexico
Norway − 0.03 − 1.18 1.22 − 0.06
Poland 1.45 0.21 1.23 0.01
and the Republic of Korea deteriorated in productivity efficiency. Using
Portugal 1.27 − 2.34 3.66 − 0.04 a semi-parametric approach, G. Feng et al. (2021) estimated that the
Republic of Korea − 0.12 − 1.92 0.77 1.02 Republic of Korea has negative TFP growth. Mavi and Mavi (2019) used
Slovakia 1.98 0.21 − 1.36 3.13 the Malmquist productivity index and discovered that Canada, Mexico,
Slovenia 0.65 − 1.11 0.55 1.21
and Turkey had negative green productivity growth during 2012–2015.
Spain 1.61 − 0.01 1.44 0.18
Sweden 0.58 − 0.94 2.44 − 0.92 Although our results are largely consistent with many studies eval­
Switzerland 2.31 0.00 2.42 − 0.11 uating green productivity, there are some differences in the relative
Turkey − 0.61 − 0.24 0.45 − 0.81 efficiency of some specific countries. With the non-parametric approach,
United Kingdom 0.97 0.00 1.10 − 0.13 this can be due to the selection of comparison countries, which are also
United States 1.09 0.00 1.37 − 0.28
called benchmarks. Since the inefficiency value was calculated using the
Average 1.06 − 0.46 0.93 0.59
distance from the production frontier created from a group of countries,
initially efficient countries with positive productivity growth could turn
including Canada, Costa Rica, Iceland, Mexico, Norway, Republic of into a negative one as more countries are included in the group as there
Korea and Turkey (see Fig. 4). The reasons for the deterioration in GTFP were more efficient countries to be included.
in these seven countries are complicated. To see when and why this
happened, Fig. 5 shows the trend of the GTFP and its decomposition for 4.2.2. Impact of trade and investment from China on green productivity in
these seven countries. Canada’s GTFP steadily declined over the period OECD countries
2008–2016. However, Costa Rica already reduced its GTFP before 2009. In this section, the empirical results obtained for the two approaches
Iceland’s, Mexico’s and Norway’s GTFP decreased drastically in 2008 are presented. The results of the OLS and F.E. models with trade and
and 2009. After examining the facts, these countries can be grouped into investment as independent variables are presented in Table 4. The
three categories based on their different main negative components. The empirical results show that trade with and investment from China
countries with negative growth in the first category are Canada, Mexico, contributed significantly to GTFP in OECD countries. From Table 4
Norway, the Republic of Korea and Turkey. The reason for their negative column (1), it can be seen that although the results of the OLS method
growth was mainly attributed to the negative TEC. In the second cate­ are significant only at the 0.1 level, this may be due to the lack of
gory, only Costa Rica had a negative T.P. in the period 2000–2019. additional control conditions. However, since the OLS method offers
Iceland also belonged to the third category. In the case of Iceland, the little control, the results of the OLS method may not be reliable. To

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Fig. 4. The average annual GTFP change (%).

Fig. 5. The negative GTFP growth countries.

account for heteroscedasticity, the fixed effects model is presented in
Table 4, column (2). Once established for countries, the possible effect of
heteroscedasticity was reduced and the results were significant. There­
fore, this model showed that trade between China and OECD countries
promotes the growth of GTFP.
Next, the interpretation of columns (3) and (4) of Table 4 was similar
to that of columns (1) and (2). In Table 4 column (3), it is indicated that
the OLS method has a significance reached at the 0.1 level. Likewise, the
OLS method was not very reliable for the results for the above reasons.
At this point, this result should not be overstated, even if it has gained

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Z. Shen et al. Resources Policy 85 (2023) 103896

The mechanism of action of trade and investment on green produc­

tivity requires further discussion. First, the trade effects mechanism
provides theoretical support for why China’s trade and investment did
not seek protection from pollution in OECD countries. According to Yu
et al. (2022), imports increasingly boost green productivity for
high-income countries, while exports gradually improve green produc­
tivity. In theory, since most OECD countries are developed, high-income
countries, international trade is more likely to have a positive impact on
the green productivity of OECD countries through the following mech­
anisms. While low-income economies often become environmental ha­
vens, high-income economies with strict environmental standards
export polluting industries to low-income economies with fewer envi­
ronmental regulations. By prioritizing environmental sustainability over
mere economic growth, high-income economies would reallocate re­
sources to clean and high-value industries conducive to low-carbon
Fig. 6. Outliers in terms of GDP and Population.
transformation and expand the use of pollution control technologies.
Furthermore, Saggi (2002) explained that trade increases the envi­
Table 4
ronmental awareness of residents by promoting economic development
Regression results of trade and investment. and income growth, thereby urging the government to enact stricter
environmental regulations. Second, the debate about the potential of
(1) (2) (3) (4)
investments to increase GTFP remains contentious. Kottaridi and Sten­
VARIABLES gos (2010) discovered a non-linear relationship between investment and
economic growth in high-income countries. Above a certain level there
trade 0.004* 0.011** can be a crowding out effect as foreign direct investment competes with
(1.82) (2.30) domestic funds. Once FDI exceeds this level, investments can be made in
investment 0.001* 0.003***
(1.84) (3.13)
a broader range of activities and will not be affected by the crowding-out
L.ΣGTFP 0.991*** 0.814*** 0.972*** 0.822*** effect. Conversely, Bournakis and Tsionas (2022) argued that higher
(58.82) (22.50) (63.51) (32.29) levels of foreign direct investment favored productivity growth since
dhc 0.003 0.471* − 0.265 − 0.056 higher exposure to foreign direct investment initiated the redistributive
(0.02) (1.81) (-1.50) (-0.19)
mechanism among domestic firms and reallocated market segments to
consumption − 0.026* − 0.267*** − 0.028* − 0.249***
(-1.90) (-6.21) (-1.81) (-9.24) higher productivity firms. Despite the ongoing controversy surrounding
industry − 0.000 − 0.083* − 0.001 − 0.049 this topic, our empirical analysis cannot make the existence of a
(-0.02) (-1.85) (-0.10) (-1.62) nonlinearity phenomenon credible. Instead, it means that a direct in­
inflation 0.002*** 0.004*** 0.002 0.005** crease in foreign direct investment leads to a corresponding increase in
(3.01) (4.24) (1.28) (2.67)
Constant 0.014 0.230* 0.019 0.119
green productivity.
(0.48) (1.75) (0.64) (1.40) In addition to the main research topics of this work, there were three
variables worth mentioning in summarizing Table 4, the lag term of the
Observations 680 680 443 443
cumulative GTFP (L. ΣGTFP), consumption and inflation. First, the re­
R-squared 0.912 0.835 0.914 0.831 sults for L. ΣGTFP were consistently significant positive numbers. This
Country FE NO YES NO YES
Year FE NO YES NO YES
Number of countries 36 33 36 33 Table 5
Robustness test regression results of trade and investment.
Robust t-statistics in parentheses.
***p < 0.01, **p < 0.05, *p < 0.1. (1) (2) (3) (4)

VARIABLES
importance. A fixed effects model was used to increase credibility and is
presented in column (4). Once established for countries, the possible trade 0.001 0.009*
effect of heteroscedasticity was reduced and the results were significant. (0.64) (1.77)
investment 0.001* 0.003***
These results showed that Chinese investments in OECD countries
(1.75) (2.99)
contributed to the growth of the GTFP. L.ΣGTFP 0.991*** 0.836*** 0.974*** 0.830***
Table 4 shows that trade with and investment from China contrib­ (74.28) (29.82) (60.56) (32.94)
uted significantly to the GTFP in OECD countries. The main reason for dhc 0.020 0.416 − 0.270 0.003
(0.12) (1.56) (-1.39) (0.01)
this was that regulation in OECD countries was more systematic and
consumption − 0.025* − 0.239*** − 0.027 − 0.261***
practical than in China. First, OECD countries were generally relatively (-1.78) (-5.05) (-1.59) (-7.08)
developed economically and technologically. It was difficult for Chinese industry − 0.003 − 0.067 − 0.001 − 0.056
companies to trade in these countries, buy highly polluting products, or (-0.42) (-1.25) (-0.06) (-1.62)
invest in factories that were not environmentally friendly. As a result, inflation 0.002*** 0.004*** 0.002 0.006***
(2.98) (3.94) (1.38) (2.83)
Chinese trade mainly bought environmentally sustainable goods made
Constant 0.014 0.183 0.018 0.138
in OECD countries, and Chinese investment focused on relatively less (0.53) (1.23) (0.53) (1.42)
polluting stages of production, such as research and design. In this way,
the synergistic effect of trade with China and China’s investments in Observations 623 623 413 413
OECD countries has helped to promote cleaner production by local R-squared 0.911 0.842 0.908 0.824
companies. This result was consistent with the overall impact of trade Country FE NO YES NO YES
and investment on green productivity at city and state levels (Qiu et al., Number of id 33 30
2021; Yu et al., 2021). Similar insights can also be found on how China’s Robust t-statistics in parentheses.
investments improve the GTFP in BRI countries (Wu et al., 2020). ***p < 0.01, **p < 0.05, *p < 0.1.

8
Z. Shen et al.
was an autoregressive effect. Secondly, the consumption results were
clearly negative throughout. This showed that rising government and
household consumption did not contribute to an improvement in the
GTFP. Third, the impact of inflation has always been clearly positive.
This may explain why moderate inflation has been conducive to
increasing production efficiency.
4.3. Robustness tests
The above analysis concluded that trade and investment from China
contributed to the growth of GTFP. To rectify the robustness of our
conclusion, the following robustness test is applied: three countries
whose values of GDP and population were markedly different are
dropped from the sample. And such an extremity may result in a
distortion of regression results. As shown in Fig. 6, Luxembourg and
Iceland were relatively smaller than other countries, while the United
States was a giant in terms of both GDP and population. After dropping
these three countries, Equations (9) and (10) are estimated again.
Table 5 shows the regression results after excluding the United States
and Iceland. The impact of trade on the GTFP of OECD countries is
shown in columns (1) and (2). Comparing columns (1) and (2) from
Tables 4 and 5, the regression result of trade after removing the outliers
was still significant and the numerical difference of the regression co­
efficient of trade was also very small. Comparing columns (3) and (4)
from Tables 4 and 5, the investment regression results were also sig­
nificant. Even after removing the USA and Iceland, the numerical dif­
ference in the regression coefficients of investments was also very small.
The significance of the regression results did not decrease after removing
the US and Iceland, and the numerical differences in the regression co­
efficients were insignificant. These confirmed that our regression results
were robust.
5. Conclusions and policy implications
Due to its industrial strength in manufacturing and world-class
import-export merchandising activities, China is a key partner for
many countries, but trade tensions between China and developed
countries have been steadily evolving in recent years. This study at­
tempts to examine green development in 38 OECD countries by calcu­
lating their total green factor productivity from 2000 to 2019 using the
by-production model and the Luenberger-Hicks-Moorsteen productivity
indicator. Econometric models are then used to study the impact of trade
and investment with China on Chinese green productivity growth in
OECD countries.
The main findings of this study are as follows. First, OECD countries
have made strides in GTFP over the past two decades, with technological
advances and changes in efficiency of scale being key factors, but more
and more countries have become less efficient in their technological
efficiency. Second, the results of the econometric estimation show that
trade with China has a significant positive impact on improving the
GTFP in OECD countries. Third, Chinese investments also had a positive
impact on the increase in GTFP in OECD countries. Finally, this study
highlighted the negative impact of consumption on GTFP and the pos­
itive impact of inflation on GTFP.
Based on these findings, the policy implications are as follows. First,
OECD countries should continue to encourage trade with China, since
empirical evidence shows that trade with China increases GTFP and does
not pose environmental problems. China’s comparative advantage in
producing more efficient products benefits OECD countries, and shifting
less specialized production to China increases OECD countries’ effi­
ciency. In addition, the systematic and comprehensive regulations in
OECD countries help to avoid environmentally harmful goods and ser­
vices that are manufactured or supplied in OECD countries. Second,
China should continue to invest in OECD countries, since Chinese in­
vestments can significantly increase GTFP in these countries. China can
invest strategically in agriculture, manufacturing and renewable energy,
9
Resources Policy 85 (2023) 103896
and strengthen cooperation with OECD countries to improve local use of
rich resources. Finally, OECD countries can promote research and
innovation platforms and bring together Chinese researchers, experts
and engineers to improve innovation capabilities. This cooperation will
have a spillover effect and benefit GTFP in OECD countries.
However, this study may have some limitations. First, trade and in­
vestment may not have the same impact on the three components of the
GTFP, and their coefficients and signs can vary for TEC, T.P. and SEC
may be different. Second, while OECD economies are essentially the
same, the impact on trade and investment can differ depending on his­
torical context, social culture, economic structure, and attitudes towards
China, leading to heterogeneity and different impacts of trade and in­
vestment. Finally, the integration of social policy and economics can
have spatial spillover effects, and the competitive or imitation behavior
of neighboring countries can influence the impact of trade and
investment.
Credit author statement
Shen Z: Methodology, Concept, Computation, Reviewing and Edit­
ing, Revision preparation; Zhao Y.: Methodology, Data, Computation,
Writing the draft, Revision preparation; Guneri F: Reviewing and Edit­
ing, Revision preparation; Yang Y: Data, Reviewing and Editing; Wang S:
Reviewing and Editing, Revision preparation; Deng H: Reviewing and
Editing, Resource and supervision, Revision preparation.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
Acknowledgements
Shen Z. and Zhao Y. contributed equally to this paper. We
acknowledge the research fund from the National Natural Science
Foundation of China (72104028 and 72003012) and the financial sup­
port from the Beijing Institute of Technology Research Fund
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