The Effect of the National Specially Monitored Firms Program on Water-Polluting Firms’ Green Total Factor Productivity

Since 2007, the National Specially Monitored Firms (NSMF) program has been a key instrument in the Chinese government’s environmental regulation efforts and a crucial approach for achieving sustainable development in China. There is limited literature examining its effect on green total factor productivity (GTFP). This study investigates the effect of this policy on water-polluting firms’ GTFP using pollution discharge data from Chinese industrial firms and employing a time-varying difference-in-differences model. The findings illustrate that (1) the NSMF program significantly enhances the GTFP of water-polluting firms, primarily by promoting technological progress; (2) the NSMF program advances water-polluting firms’ GTFP through three channels: alleviating financing constraints, improving human capital, enhancing pollution treatment technologies. This study provides empirical evidence on the effectiveness of the NSMF program, offering valuable insights for the formulation of command-and-control environmental regulations and the pursuit of sustainable social development in the future.