The river chief system and the total factor productivity in China: Evidence from the industrial enterprises database

Balancing water environmental protection and economic growth is a priority for the local governments. Many literature analyses found that the reform of the River Chief System (RCS) had a significant effect on water quality improvement in China; however, it is important and necessary to comprehensively assess the impact of the RCS on the total factor productivity (TFP) of industrial enterprises, which provides a realistic basis for the decisions of local governments. This paper uses the quasi-natural experiment of the RCS in China and data from Chinese industrial enterprises to analyze the impact of the policy reform on the total factor productivity (TFP) of enterprises and the influence mechanism. The empirical analysis finds that the TFP of industrial enterprises in the reformed areas of the RCS is significantly lower than that in the non-reformed areas. This indicates that the implementation of the RCS is not conducive to the improvement of TFP of industrial enterprises. And this effect is mainly generated by reducing the output level and capital allocation efficiency of industrial enterprises. Meanwhile, the impact of the RCS on the TFP of industrial enterprises exists heterogeneity.