Measuring Quality of Economic Growth Incorporating Environment and Social Welfare:a Total Productivity Approach with an Application on China

Abstract

By extending the traditional productivity theory, a new concept total productivity(TP) is introduced. Using a directional distance function approach, the concept is applied to measuring economic growth of 8 economic regions of China covering an 18 years period(1997-2014) and test its convergence. Results showed that TP grew at an average rate of 6.6% per year led mainly by technical change(6.5%). When environmental undesirable outputs are included, the Middle Yellow River, Northwest and Southwest regions of China witnessed higher productivity changes. Results of the convergence analysis revealed that China had made progress in reducing regional imbalance in growth. Inclusion of undesirable output showed that the energy-saving emission reduction policies had speed up the convergence rate of TP and environment oriented productivity. However, China's welfare oriented productivity is still very low.