Potential Green Gains From the Integration of Economies

Abstract

The integration of economies always attracts much attention from policymakers and researchers. This paper introduces a novel approach to evaluate potential economic and environmental gains from integrating economies. Based on aggregate production technology and directional distance functions, we regard all decision-making units as a whole, allowing free resource reallocation among units. The level of resource misallocation is identified by a structural measure, which is obtained by the difference between overall potential improvement and individual technical inefficiency. Taking China as an empirical example, possible economic output expansions are estimated at 43.2% and 10.1% under convex and nonconvex production technologies, respectively; potential pollution reductions are around 28.4% and 5.1% under convex and nonconvex production technologies, respectively. A significant disparity of structural inefficiencies is detected, indicating a high level of resource misallocation in China. Economic cooperation is vital to promote potential green gains for all provinces in China.

Regional Economic Competition, Fiscal Subsidies, and Overcapacity

“…As the constraints of sustainable development are becoming increasingly prominent, various regions in China are facing serious resource consumption and environmental pollution (Shen et al, 2022;Yu et al, 2022). Environmental pollution has a serious impact on people's health and welfare.…”