Dynamic System Model to Assess the Impact of Factors on Green Total Factor Productivity: The Case of Vietnamese Manufacturing Firms in the Period 2012–2022

ABSTRACT In the context of Vietnam's rapid industrialization and rising environmental pressures, improving productivity while reducing negative environmental impacts has become a central policy concern. This study decomposes the Global Malmquist‐Luenberger (GML) index (known as green total factor productivity—Green TFP) and the Global Malmquist (GM) index without environmental considerations into efficiency change and technological progress components of manufacturing firms in 36 provinces of Vietnam during the period 2012–2022. The result finds that, on average, the GML index of manufacturing firms is higher than the GM index over the study period. Technological progress is the main driver of improvements in the GML index. By a static panel data model and a dynamic system model, the study assesses the impact of factors on Green TFP and finds that research and development (R&D), labor productivity, and capital intensity have positive effects on Green TFP, whereas increases in the energy consumption rate and the share of fossil fuel consumption have negative effects on Green TFP. Therefore, policies that promote green innovation, investment in environmentally friendly technologies, and efforts to improve workers' qualifications are crucial and such policies must be sustained over the long term to effectively promote Green TFP.