A productivity analysis considering environmental pollution and diseases in China

Environmental pollution and human health problems are becoming serious issues in China. This research focuses on regional differences in productive inefficiencies and attempts to clarify the determinants of inefficiency, accounting economic, environmental and health-related factors. Our dataset includes information of 29 areas in China from 2003 to 2009. We find that after accounting for environmental pollution and health impacts, the productive inefficiency of the examined areas reduced; this result holds for both the national and provincial levels. Our results imply that government efforts to improve social welfare should emphasize increases in foreign direct investment and private medical expenditures.