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Driving force for China's economic development under Industry 4.0 and circular
economy: Technological innovation or structural change?

Xiaoxiao Zhou, Malin Song, Lianbiao Cui

PII: S0959-6526(20)32727-X
DOI: https://doi.org/10.1016/j.jclepro.2020.122680
Reference: JCLP 122680

To appear in: Journal of Cleaner Production

Received Date: 14 January 2020

Revised Date: 23 May 2020
Accepted Date: 5 June 2020

Please cite this article as: Zhou X, Song M, Cui L, Driving Force for China’s Economic Development
under Industry 4.0 and Circular Economy: Technological Innovation or Structural Change?, Journal of
Cleaner Production, https://doi.org/10.1016/j.jclepro.2020.122680.

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 CRediT author statement

Xiaoxiao Zhou: Conceptualization, Methodology, Software,

Validation

Malin Song: Formal analysis, Writing- Original draft

preparation.

Lianbiao Cui: Conceptualization, Visualization, Investigation,

Writing- Reviewing and Editing.

Driving Force for China’s Economic Development under

Industry 4.0 and Circular Economy: Technological

Innovation or Structural Change?

Xiaoxiao Zhoua, Malin Songb, Lianbiao Cuib,∗

a
School of Finance, Anhui University of Finance and Economics, Bengbu 233030, P.
R. China
b
School of Statistics and Applied Mathematics, Anhui University of Finance and
Economics, Bengbu 233030, P. R. China

Abstract: The integration of the circular economy (CE), a model promoting the
cyclical use of resources, and Industry 4.0, an intelligent-based approach to
manufacturing, is expected to achieve sustainability. Finding the most suitable path
for technological progress and structural change to promote economic growth is the
key to adopting Industry 4.0 technologies and successfully transforming to a CE, and
thus, key to China achieving sustainable development quickly. This study identifies
the joint effects of energy- and environment-biased technological progress and
multi-dimensional industrial structural change on economic growth, and empirically
verifies the specific effects within China. Our results are as follows. First, pollution
abatement technological progress, backstop technological progress and autogenous
structural ecologicalization are the main drivers of sustainable economic growth.
Second, innovation policies have a positive impact on national economic growth by
promoting pollution abatement technological progress. Finally, in sub-regions’
regression, backstop and environment technology, and structural ecologicalization
promote eastern China’s economy, while policies drive environment technological
progress and structural ecologicalization to stimulate economic growth in central and
western China. Our results imply that policymakers should take into consideration the
readiness levels of each region regarding the adoption of Industry 4.0 and circular
economy, and that the government should consider and ensure the participation of all
stakeholders, including firms.

Keywords: Industry 4.0; Circular Economy; Economic Growth; Biased

Technological Progress; Industrial Structural Change

∗
Corresponding author. E-mail address: cuilb1987@126.com. Tel.: +8618355257096. Fax: + 8605523171212.
Driving Force for China’s Economic Development under

Industry 4.0 and Circular Economy: Technological

Innovation or Structural Change?

Xiaoxiao Zhoua, Malin Songb, Lianbiao Cuib,∗

a
School of Finance, Anhui University of Finance and Economics, Bengbu 233030, P.
R. China
b
School of Statistics and Applied Mathematics, Anhui University of Finance and
Economics, Bengbu 233030, P. R. China

Abstract: The integration of the circular economy (CE), a model promoting the
cyclical use of resources, and Industry 4.0, an intelligent-based approach to
manufacturing, is expected to achieve sustainability. Finding the most suitable path
for technological progress and structural change to promote economic growth is the
key to adopting Industry 4.0 technologies and successfully transforming to a CE, and
thus, key to China achieving sustainable development quickly. This study identifies
the joint effects of energy- and environment-biased technological progress and
multi-dimensional industrial structural change on economic growth, and empirically
verifies the specific effects within China. Our results are as follows. First, pollution
abatement technological progress, backstop technological progress and autogenous
structural ecologicalization are the main drivers of sustainable economic growth.
Second, innovation policies have a positive impact on national economic growth by
promoting pollution abatement technological progress. Finally, in sub-regions’
regression, backstop and environment technology, and structural ecologicalization
promote eastern China’s economy, while policies drive environment technological
progress and structural ecologicalization to stimulate economic growth in central and
western China. Our results imply that policymakers should take into consideration
the readiness levels of each region regarding the adoption of Industry 4.0 and
circular economy, and that the government should consider and ensure the
participation of all stakeholders, including firms.

Keywords: Industry 4.0; Circular Economy; Economic Growth; Biased

∗
Corresponding author. E-mail address: cuilb1987@126.com. Tel.: +8618355257096. Fax: + 8605523171212.

1
Technological Progress; Industrial Structural Change

Highlights
Focus on the economy’s driving forces under Industry 4.0 and circular
economy.
Environment and new-energy technological progress promote economic growth
in China.
Innovation policy drives economic growth by inducing biased technological
progress.
Backstop and environment technological progress benefit eastern and central
China.
Industrial policy works well on structural ecologicalization and regional
economy.

1. Introduction

Confronted with increasingly tight resource constraints and severe environmental

pollution caused by unsustainable consumption and production patterns, China, as an
emerging economy, is seeking a transformation of its economy to achieve both
economic growth and environmental sustainability (Tseng et al., 2018). Meanwhile,
given the changing outlook on the industrial sector due to global recessions in the
last few decades, reforming the manufacturing sector and fostering international
competitiveness has become a matter of urgency for emerging markets.
As such, the circular economy (CE), an economic system that seeks to balance
environment protection and economic growth, has gained popularity as a tool for
sustainable development, especially given the current transition toward the adoption
of novel technological approaches. This system facilitates cleaner production,
enhances resource efficiency, and enables a more sustainable economic structure
2
(Flynn et al., 2019; Schroeder et al., 2019; Bag et al., 2020). Additionally, taking a
full life cycle perspective, from production to consumption, the enhanced connection
between industries and the emerging cross-industry network brings about structural
changes to improve resource reallocation.
The emergent Industry 4.0, also known as the fourth industrial revolution
(Thames and Schaefer, 2016), is widely credited for Germany’s recovery of its
competitiveness following the global recession. The concept of Industry 4.0-based
sustainability incorporates environmental protection and control, resource efficiency,
smarter and flexible processes, and modern technologies to change the way of life,
create new business and manufacturing models, and renew industry structure (de
Sousa Jabbour et al., 2018b; Luthra and Mangla, 2018; Alcácer and Cruz-Machado,
2019; Luthra et al., 2020). In today’s competitive scenario, every industry strives to
adapt and acculturate to Industry 4.0, and most economies struggle with intelligence
and digital transformation.
Sustainability can be achieved by integrating CE and Industry 4.0 at a theoretical
level (Rajput and Singh, 2019; de Sousa Jabbour et al., 2018a). It is important to
explicitly address the complex interaction between CE and Industry 4.0 (de Sousa
Jabbour et al., 2018a). A series of works take Industry 4.0, CE, and sustainability
into consideration. Among them, some scholars focus on the implementation of
Industry 4.0 and/or CE and provide abundant measurements of their application at
the firm and country level (Alaerts et al., 2019). Some researchers probe the driving
forces and/or barriers of the adoption of Industry 4.0 technologies and the transition
toward CE (Horváth and Szabó, 2019; Raj et al., 2019; Hartey et al., 2020). A few
review papers attempt to clarify the definition and connotation of Industry 4.0 or CE
(Culot et al., 2020; Beier et al., 2020; Anastasiades et al., 2020). Additionally, an
increasing number of papers are examining the links between Industry 4.0 and
sustainability (Ghobakhloo, 2020; Beier et al., 2020; Bag et al., 2020; Luthra et al.,
2020), and the relevance of CE and sustainability (Schroeder et al., 2019; Yadav et
al., 2020). Despite being criticized for lacking an apposite definition, the objective
3
behind Industry 4.0 and CE is the achievement of sustainability by boosting
technological progress and reconstructing industrial structures, subsequently
attaining higher resource efficiency and reasonable economic models.
In 2008, China created and enforced a law regarding CE (Korhonen et al., 2018),
and recently placed CE at the center of its policymaking (Wu et al., 2014; de Sousa
Jabbour et al., 2018a). “Made in China 2025,” a local program to enhance the
development and adoption of Industry 4.0 technologies (Chein et al., 2017;
Dalenogare et al., 2018; Luthra et al., 2020), has been implemented to support
China’s self-sustainability goal. It is necessary to estimate the enforcement of
Industry 4.0 and CE and their effect on China’s economy.
However, the lack of unified quantitative indicators for CE and Industry 4.0
technologies makes it extremely difficult to macroscopically assess the performance
of CE and/or Industry 4.0 and their effect on an economy (Millar et al., 2019).
Although there are many connections between Industry 4.0 and CE (Rajput and
Singh, 2019), few papers clarify the interaction of Industry 4.0 and CE with the
economy and estimate their joint effects simultaneously. By neglecting the fact that
developing countries may require a partial implementation of Industry 4.0 concepts
created in developed countries (Dalenogare et al., 2018; Dalmarco et al., 2019) and
assimilate CE in a way suited to their specific social-economic circumstances (Flynn
et al., 2019), it may be arbitrary and one-sided to assess the integrated effect of CE
and Industry 4.0 on an economy. As discussed in aforementioned analyses, both CE
and Industry 4.0 can help a country attain sustainability by acting as enablers of
environment-friendly technological progress and by propelling the optimization of
industrial structures (see Fig. 1). Hence, this study assesses the joint effect of CE and
Industry 4.0 from a technology progress and structural change perspective.
Considering the concepts of “directed/biased technological progress”—currently
a buzzword—and “cleaner production” (Acemoglu et al., 2012; Hens et al., 2018),
CE and Industry 4.0, on one hand, can accelerate energy- and environment-biased
technological progress to promote resource efficiency and further the balance of
4
environmental and economic sustainability (Backhaus and Nadarajah, 2019;
Anastasiades et al., 2020). On the other hand, the adoption of Industry 4.0 and the
transformation toward a CE can bring about the flow of cross-industry factors,
effective resource reallocation, as well as industry structural changes, eventually
leading to successfully striking a balance between social and economic sustainability
(Alaerts et al., 2019).

-----------------------------------------------------------------------------
Insert Figure 1 about here
-----------------------------------------------------------------------------
This study systematically identifies the mechanisms of the joint effects of
Industry 4.0 and CE on the economy by considering both biased technological
progress, including energy saving, pollution abatement, and backstop technological
progress, as well as multi-dimensional structural changes, including industrial
structure upgrading, rationalization, and ecologicalization, simultaneously. Based on
China’s provincial data from 2000–2016, the national and regional empirical results
are derived and discussed to optimize the implementation of Industry 4.0 and CE.
From this, two features stand out. First, we simultaneously measure the effect of
Industry 4.0 and CE on economic growth from the perspective of technological and
structural innovation. Second, although this study may not be the first to measure
technological progress and structural change from different dimensions, it makes a
major contribution to the field by respectively examining directed technological
progress and structural change from three dimensions simultaneously.
The remainder of the paper is organized as follows. Section 2 covers the
heterogeneous mechanism through which technological and structural change affect
economic growth. Section 3 provides our empirical design by specifying the
econometric model and the means of constructing variables. The regression results
are outlined in Section 4. Section 5 concludes and notes major implications for
policymaking.
5
2. Theoretical model

In the context of Industry 4.0 and CE, it is important to take both energy and
environment as the inputs of the economy. Following the research of Acemoglu et al.
(2012) and Damsgaard (2012), energy and environmental resources have been
regarded as third and fourth inputs for production in the model, respectively.
Therefore, a two-sector model is constructed as follows:

U= , + , , , ℎ (1)

In the model, + = and + = . Here, and are total capital and

labor input in the economy, respectively. As a two-sector model, Sector 1 is a clean
sector that only inputs capital ( ) and labor ( ). Sector 2 is a polluting sector,

which not only needs the input of capital ( ) and labor, ( ) but also consumes large

amounts of energy ( ) and causes pollution emission, namely the consumption of

environmental resources (ℎ). According to Gabardo et al. (2019), industry structural
change can be descripted as any change in the distribution of production and
employment within and among all economic sectors. In our two-sector model,
structural change is presented as the change of and , which actually refer to
the corresponding services and manufacture industries, respectively. Specifically, an

increase in reflects the upgrading of industrial structures, which indicates the

transition of regional industrial structures from a low level to a high level in the
supply chain. Since industrial structural rationalization encourages dynamic
transitioning and coordination between different industries, as well as coordinates

cross-regional industrial structures, it can be described as the different states of

and . Matching with the initial motivation of CE and Industry 4.0, industrial

structural ecologicalization indicates the struggle in making industrial production

less polluting and energy consuming, as well as increasing the share of an
6
environment-friendly industry. To some extent, the promotion of energy efficiency

and environment efficiency in Sector 2, which are represented by the growth of

and , respectively, indicates the ecologicalization of industries. In addition, the

increase in new energy efficiency in Sector 1 brings about the ecologicalization of

the economy.

∗ indicates the corresponding technical coefficient of the input factor *, setting

> 0. According to the description of biased technological progress in Acemoglu

"∗

et al. (2012, 2016), we agree that energy- and environment-biased technological

progress can be described as extensively promoting the corresponding efficiencies.
Therefore, the biased technical progress of the input factor * leads to a rise in the
efficiency of the corresponding sector. Here, take A& and A' as indexes of fossil
energy technology and environment technology, respectively. Considering the
relationship between environmental pollution and energy consumption, we specify a
proportional relationship between environmental resources and energy consumption,
and assume that ℎ = , which decreases with the improvement of pollution
abatement technology induced by industry 4.0 adoption and CE transition. Along
with the setting of backstop technology in Acemoglu et al. (2012), we also choose
A( as representing backstop technology, which essentially means new energy

technology.
By obtaining partial derivatives , , , , , and ℎ from the utility
function, under the framework of local equilibrium, the profit maximization equation
of each sector needs to satisfy the following conditions:

)* )- ./ + , .0 ( )- ./ + , .0 ( , .1 & , .2 '
=0↔ = (2)
)+ )+ )+

)* )- ./ + , .0 ( )- ./ + , .0 ( , .1 & , .2 '
)(
=0↔ )(
= )(
(3)

)* )- ./ + , .0 ( , .1 & , .2 '
= =0 (4)
)& )&

)* )- ./ + , .0 ( , .1 & , .2 '
= =0 (5)
)' )'
7
 The above equilibrium state varies with changes in technology and structure.
Specifically:
(1) When the energy utilization technology improves, that is, when there is
)* )- )-
energy-saving technological progress (as A& → A4& ), then )&
> 0, )+
> )+ , and

)- )-
)(
> )( . This means that the marginal utilities of capital and labor in Sector 2 will

increase alongside the progress of energy-saving technology. On the premise of a

free flow of factors, capital and labor will gradually shift from the inefficient sector,
Sector 1, to the efficient sector, Sector 2 (k → k 4 , l → l4 , k → k 7 , and l →
)*8 )-8 )-9 )-8 )-9
l7 )① until a new equilibrium state is reached ( )&8 = 0, = )+9, and = )(9 ).
)+8 )(8

At this time, f 4 > f , f 7 < f , |∆f | > |∆f |, and U 4 > >. The corresponding
-
sector structure will change from the initial equilibrium state to the new
-

-8 -8 -
equilibrium state -9
, where -9
> - . Then we conclude that, when resources flow

freely, energy-saving technological progress improves efficiency and ultimately

stimulates economic growth. Additionally, it promotes factors’ cross-sector flow and
subsequently leads to structural changes.
(2) As pollution control technology improves (as A' → A4' ), then h4 e < ℎ e ,
that is, the use of the same polluting energy causes less environmental pollution and
fewer environmental resources are needed to achieve the same level of production.
)* )- )- )- )-
Here, )'
> 0, )+
> )+ , and )(
> )( as the marginal utility of capital and labor in

Sector 2 increases with the progress of pollution abatement technology.② With the
free movement of factors, capital and labor gradually shift from Sector 1 to Sector 2
(such that k → k 4 , l → l4 , k → k 7 and l → l7 ) and ultimately settle at a new

①
Total capital K and total labor L are assumed not to change with technological progress. Even considering that total capital
and the total labor force increase with technology across generations, ∆k > ∆k , ∆l > ∆l and the above conclusion still
hold.
②
From the perspective of environmental resource utilization, the improvement of pollution control technology leads to a
reduction of polluting emissions and environmental disruption. Thus, the pollution abatement technological progress can also
be regarded as environmental conservation technological progress.

8
 )* )-8 )-9 )-8 )-9
equilibrium state ( = 0, = and = ). Here, f 4 > f , f 7 < f ,
)'8 )+8 )+9 )(8 )(9

-
|∆f | > |∆f | and U 4 > >; the corresponding sector structure will change from
-

-8 -8 -
to
-9
and -9
> - . Thus, it can be theorized that with factors flowing freely,

pollution control technological progress stimulates economic growth by improving

environmental efficiency and promotes structural changes through the induced
movement of cross-sector factors.
(3) When the clean sector produces technological innovations (i.e.,
)- )-
technological progress within the labor force, that is, A( → A4( ), then )+
< )+

)- )-
and < )( . This means that the marginal utility of capital and labor in Sector 1
)(

increases with the progress of new energy technology (backstop technology) by

keeping in line with Acemoglu et al. (2012). With the free movement of factors,
capital and labor gradually shift from Sector 2 to Sector 1 (such that k → k 4 ,
)*
l → l4 , k → k 7 and l → l7 and produce a new equilibrium state ( )&9 = 0,
)-9 )-8 )-9 )-8
)+9
= )+8 and )(9
= )(8 ). Here, f 4 > f , f 7 < f , |∆f | > |∆f | and U 4 > >; the
- -9 -9 -
corresponding sector structure will change from to and < - . Then, we
- -8 -8

propose that with factors flowing freely, backstop technology progress stimulates
economic growth by promoting efficiency and leads to structural changes by
propelling the movement of cross-sector factors.
(4) The above analyses assume that resources can flow freely among sectors of
the economy with the deepening of Industry 4.0 technologies and the CE model.
However, during the process of Industry 4.0 technologies adoption and CE transition,
many barriers appear and not all regions hold the capability (e.g., high investment,
proper infrastructure and institution, digital culture, skilled workforce and so on) to
adopt Industry 4.0 technologies (Luthra and Mangla, 2018; Horváth and Szabó, 2019;
Raj et al., 2019) and accept the CE model (Kuah and Wang, 2020; Hartey et al.,
2020). Thus, the assumption of factors freely flowing is loosened, and two different

9
states have been discussed in the following.
(a) Technological progress brought by Industry 4.0 and CE changes the sectors’
efficiency and leads to imbalances relative to the original structure. When the
backstop technology progress brings higher efficiency improvements, corresponding
industrial policies should be formulated to cut down the cost of labor and capital
flow and guide high-quality capital and labor to the cleaner sectors with high
efficiency, which can effectively improve economic growth (Acemoglu et al., 2018;
Alonso-Carrera and Raurich, 2018). In essence, Sector 1 could be considered as the
service sector and Sector 2 as the industry sector. Thus, the structural optimization
caused by inter-departmental biased technological progress upgrades the industry
structure (Swiecki, 2017; Pi and Zhang, 2018) with the deepened adoption of
Industry 4.0 and CE. Concurrently, with resource reallocation being promoted by
both the market and government policy, the rationalization of industrial structure is
improved, further accelerating economic growth by matching technologies with
efficient sectors.
(b) When lacking technological progress, the original equilibrium state will not
change. By ignoring comparative advantage and assuming only the use of policy
-
tools to reallocate resources among sectors, industrial structure changes from to
-

-∗ - -∗
. As such, when > -∗ , preferential subsidy policies should be used to guide the
-∗ -

flow of capital and labor into services, as the more prosperous of the two sectors③
changes the existing resource allocation structure and promotes industrial upgrading.
Consequently, sufficient capital and labor promote technological progress in the
clean sector further. According to the factor endowment theory, the polluting sector
also demands technological progress in order to save the scarce factors of capital and
labor, which ultimately improves the overall level of technology. It can be seen as
the policy-induced structural and technological change with the enforcement of

③
The government can identify industries that could achieve comparative advantage based on relatively complete access to
information. To achieve balanced economic development, the government will guide investment flows to a certain extent.

10
 - -∗
Industry 4.0 and CE. When < , it means industrialization matches the
- -∗

remanufacturing technologies initially proposed in Industry 4.0 (Alcácer and

Cruz-Machado, 2019). Meanwhile, considering the externality and spillover
characteristics of the manufacturer when producing inputs for other industries,
Sector 2 will produce a greater relative contribution to economic growth. That is, in
the early stages of economic development, adequate capital and labor in the
industrial sector are prominent drivers of technological progress and account for a
large proportion of growth.
Considering inner-industry structure optimization, in the context of circular
economy and Industry 4.0, the model can be extended and refined by dividing Sector
2 into two subsectors: the “high-polluting and high-energy-consuming industry” and
the “low-polluting and low-energy-consuming” industry. Under a certain technology
condition, resources flow into the cleaner industry with the enforcement of Industry
4.0 and CE. In other words, structural ecologicalization reallocates the inner-sector’s
resources and relaxes the constraints on factors for economic development (Hartwig,
2012). In the long run, compulsory structure ecologicalization further enhances the
utilization efficiency of scarce resources, promotes the transition of CE and,
subsequently, sustainable development. Therefore, we conclude that the evolution of
industrial structures in accordance with technological progress promotes economic
growth.
The premise of the above analysis is that the direction of technological progress
and structural optimization should align with the need for economic development.
The fact that economic development levels, resource endowments, social
environments, infrastructures, culture, and other characteristics differ between
regions interferes with the value perception and implementation of Industry 4.0
technologies and CE, giving regions different innovation motives to promote
sustainable economic development and yielding different effects (Frank et al., 2016;
Silvestri et al., 2020). In addition, both the adoption of Industry 4.0 and transition to
CE require not only actions but also corresponding policies (Hartley et al., 2020;
11
Morseletto, 2020). The government’s guidance is clearly needed for realizing the
expected effect of Industry 4.0 and CE on efficiency improvement and industry
re-fostering (Alaerts et al., 2019; Luthra et al., 2020). Based on the logic chain of
“incentive policy → directed innovation response → economic effect,”
corresponding policies are crucial in facilitating the flow of factors and resource
reallocation, inducing directed technological progress and industrial restructuring,
and promoting the formation of a more efficient economy, ultimately, achieving the
transition to CE. Thus, the related policies in the theoretical model are depicted by
Figure 2. Based on the theoretical analysis, the hypotheses proposed in this study are
as follows:
Hypothesis 1: Energy- and environment-biased technological progresses have
positive effects on economic growth in the context of Industrial 4.0 and CE.
Hypothesis 2: Industrial structural rationalization, upgrading, and
ecologicalization promote economic growth in the context of Industrial 4.0 and CE.
Hypothesis 3: Innovation policies induce energy- and environment-biased
technological progress to promote economic growth.
Hypothesis 4: Industrial policies induce multidimensional structural change to
promote economic growth.

-----------------------------------------------------------------------------
Insert Figure 2 here
-----------------------------------------------------------------------------

3. Empirical design

3.1 Model
In order to evaluate the aforementioned hypotheses in China, we empirically test
the data using econometric methods. This study takes gross regional product (lngrp)
as the explained variable. Considering the spatial correlation of economic growth, it
is suitable to check the impact of innovation guidance on economic growth by using
12
the spatial panel model (Bai et al., 2012). Additionally, economic development is
characterized by path dependence on time; alternatively, there is a temporal spillover
effect of economic growth (Xu and Li, 2020). Furthermore, it can mitigate the risk of
endogeneity by including a one-phase lagged term of the explanatory variables in the
model (Elhorst, 2014). Thus, the dynamic spatial panel model is constructed as
follows:
L

ABCDEF = G ABCDEF7 + H I JEK ABCDEF + NOP QℎEF R + SOTAUEF R + VWEF

KM

+C BTXAE + Y ZCF + [EF

[EF = \ ∑L
KM JEK [EF + ^EF (6)

Here, i and t represent the region and year, respectively, and the main
explanatory variables are as follows: P QℎEF is the index of technological progress,
including the energy-saving technological progress variable _EF , the pollution
abatement technological progress variable DZEF , and the new energy technological
progress variable `PEF . TAUEF is the index of industrial structure change, including
the industrial structure rationalization variable _CEF and the industrial structure
upgrading variable _aEF . WEF represents the control variables, including education,
marketization and information levels, and industrial agglomeration. C BTXAE and
Y ZCF refer to the individual and time effects, respectively, which are not objectively
measurable. [EF is the random disturbance term.
To further explore impacts, we introduce policy variables and the cross-terms of
corresponding policy and acceptance variables into the above model, constructing
the following policy model:

ABCDEF = G ABCDEF7 + H ∑L
KM JEK ABCDEF + bcd + ef + N cd × OP QℎEF R +
g

S g f × OTAUEF R + VWEF + C BTXAE + Y ZCF + [EF (7)

Here, JEK is the element in row i and column j in the spatial weight matrix. We

13
construct the spatial weight matrix of economic distance WE, the spatial weight
matrix of geographical distance WD and the mixed spatial weight matrix of
economic distance and geographical distance WM. Specifically,

JiEK = j1plmmmmmmm
DBCDT − DBCD
mmmmmmml
o
qpr∑so=1 j1plDBCD
mmmmmmmT − DBCD
mmmmmmml
o
qt,

mmmmmmmT is the average real per capita GDP of province i in the sample year,
where DBCD

JdEK = 1⁄UTo p ∑so=1 1⁄UTo , where UEK is the geographical distance between

provinces i and j, measured by the distance by rail between the corresponding

mmmmmmmT ⁄∑so=1 mmmmmmm

provincial capitals, and JvEK = DBCD DBCDT ∗ 1⁄UTo p ∑s
o=1 1⁄UTo .

3.2 Variables and data

The explained variable is economic growth (lngrp), measured by regional GDP.
To account for its exponential growth trend, it is treated logarithmically.
Acemoglu (2002) believes that the change in total factor productivity is the most
direct manifestation of technological progress. Therefore, based on the above
division of technological progress, fossil energy, environmental, and new energy
efficiencies are used as alternative variables for energy-saving (es), pollution
abatement (pa), and backstop technological progresses (bt), respectively. As data
envelopment analysis (DEA) is widely used to measure relative efficiency (Zhu et al.,
2018), we estimate the energy and environmental efficiency of 30 provinces in China
from 2000 to 2016 by combining the super-efficiency DEA and
“energy-environment efficiency” evaluation models using the structure outlined by
Zhou and Feng (2017). The following model is produced:

14
  Minβ +γ +ϕ

 s.t.∑ t =1 ∑ k =1, k ≠ k ' zk xkn ≤ xk 'n , ∀n; ∑ t =1 ∑ k =1, k ≠ k ' zk e k ≤ β e k ' ;
T K t t t T K t _t _t


 T (8)
∑ t =1 ∑ k =1,k ≠ k ' zk ek ≤ γ ek ' ; ∑ t =1 ∑ k =1,k ≠ k ' zk yk ≥ yk ' ;
K t t t T K t t t

 T
∑ t =1 ∑ k =1,k ≠ k ' zk bk =ϕ bk ' ; zk ≥ 0, ∀k , t
K t t t t

_
where ( x, e , e, y, b) refers to non-energy input, non-fossil energy input, fossil

energy input, desirable output, and non-desirable output, respectively. T is the

number of periods and K is the number of decision-making units. ( β , γ , ϕ ) refers

to non-fossil energy, fossil energy, and environmental efficiencies, respectively. The

non-desirable output is a comprehensive index based on Wang and Feng’s (2015)
framework, combining wastewater, waste gas, solid waste, and carbon dioxide (CO2).
For details on other indexes, see Zhou and Feng (2017).
For multidimensional industrial structure optimization, an index of industrial
structure rationalization (sr) is specified according to the adjusted Theil index:
w = ∑yEM xE ⁄x A xE ⁄ E ⁄ x⁄ , T = 1, 2, 3; _C = vZ|}w ~ − w
where i represents the corresponding industry and Y and L represent the output value
and labor force, respectively.
The index of industrial structure upgrading (su) denotes the degree of industrial
transformation from industry to services, measured by the ratio of the output value of
tertiary industries to secondary industries.
The ecologicalization of industrial structure (se) refers to the degree of
transformation to green development in terms of reduced pollution and emissions.
This is measured by the proportion of the output value of below-average polluters
(as determined by mainly waste gas, wastewater, and industrial solid waste) to the
total output value of the industry, and a comprehensive ecological index of the
industrial structural change is constructed based on the three categories of industrial
structural change.
To compare with directed technological progress and structural change, this
15
study combines the indexes of technological progress and industrial structure into a
total efficiency index (tfp) and a comprehensive structural optimization index (sc)
using arithmetic averages and the entropy method. The policy variables are as
follows:
(1) Industrial policy (ia): By referring to Aghion et al. (2015) and Yao and
Zhang’s (2018) interpretation of policy documents and Chen et al.’s (2018) method
of measuring environmental regulation policy, this study collates information on
industries from government work reports. By calculating the frequency of keywords,
including “industry,” “structure,” “adjustment,” “upgrade,” “upgrading” and
“service-oriented” as alternative indexes, the intensity of industrial policy derived
from local government work reports can more accurately express the implementation
of economic industrial policy for decentralized governance.
(2) Innovation policy (rd): Since R&D activities are at the core of technological
innovation (Fujii and Managi, 2019), the turnover of technology contracts can
measure the prosperity of the technology market, reflect the status of innovation
transformation transactions, and directly form incentives for technological
innovation. Based on the ratios of R&D expenditure and technology contract
turnover to grp in each province, this study uses a variable for the comprehensive
replacement of local innovation policies obtained by the entropy method.
The control variables include foreign direct investment (fdi), the degree of
government intervention (gov), informatization level (email), and industrial
agglomeration (agg), according to Moomaw (1998), Yuan and Zuo (2013), Liang
and Yang (2019), Muhammad and Khan (2019) and Song et al. (2019). These
variables are described in more detail in Table 1.

-----------------------------------------------------------------------------
Insert Table 1 here
-----------------------------------------------------------------------------
This study uses 30 Chinese provinces and municipalities from 2000 to 2016 as
16
the research sample. All monetary unit-based indexes use fixed 2000 prices. Data are
taken from China’s statistical yearbooks and environmental statistical yearbooks.
Government work reports are mainly sourced from official government websites.
The interpolation method is used to provide data for the few missing observations.

4. Empirical results and discussion

4.1 Biased technological progress and industrial structure characteristics

In Table 2 and Figure 2, biased technological progress and different structural
changes vary across regions and should be expected to have differentiated impacts
on regions’ economies. Specifically, Table 2 shows that energy saving and
environmental conservation technology are both higher than backstop technology
and have similar tendencies due to their interrelated nature. The fluctuation in the
backstop technology signifies an insufficient application of Industry 4.0 technologies
in the utilization of new energy, which could harm the transition to CE (de Sousa
Jabbour et al., 2018a). To some extent, the U-shaped tendency of biased
technological progress indicates the increasing adoption of Industry 4.0 technologies
(Hidayatno et al., 2019).

-----------------------------------------------------------------------------
Insert Table 2 here
-----------------------------------------------------------------------------
Figure 3 demonstrates that the industrial structure rationalization in western
China exhibits a lower level and deeply unstable, but rising, trend. This level of
industrial structural upgrading is relatively higher in eastern China. Conversely,
western China has experienced reverse upgrading (i.e. reindustrialization) owing to
its preference for catch-up and the changed view of industrial sectors under Industry
4.0 (Alcácer and Cruz-Machado, 2019). Concerning industrial structural
ecologicalization—which also improved in step with the deepening transformation
of CE and adoption of Industry 4.0 technologies—the eastern areas have higher
17
levels of industrial greening than other regions in China. This may be ascribed to the
path-dependency and lock-in effect of technology (Dalmarco et al., 2019). Overall,
the regional heterogeneity and the mean of structural ecologicalization are rather low
and inadequate for a green economy.

-----------------------------------------------------------------------------
Insert Figure 3 here
-----------------------------------------------------------------------------
4.2 National regression and discussion
As shown in Table 3, Moran’s I test of lngrp, which, based on the matrix WE,
finds significant spatial correlation of regional economic growth in China. The
dynamic spatial autoregression model (SAR) with fixed effects is used for the
following empirical research based on the Hausman test and Lagrange multipliers
incorporated.

-----------------------------------------------------------------------------
Insert Table 3 here
-----------------------------------------------------------------------------
In Table 4, Model m1a includes only comprehensive technology and structural
variables. Models m1b and m1c separately introduce biased technological progress
and multi-dimensional structural change, and Model m1d includes all technological
and structural variables. First, the coefficients of the lag term of lngrp are all
significantly positive, meaning that the early stage forms the basis of later economic
growth and should promote sustainable economic development (Muhammad and
Khan, 2019). Second, the coefficients of rho are almost insignificant, indicating that
the spatial correlation of regions is indistinctive.
The results of Models mlb and m1d show that the coefficients of biased
technological progress are significant at the 5% level. The coefficients of es are
negative, while both bt and pa have significantly positive coefficients, indicating that
18
with the adoption of Industry 4.0 and the transition to CE, technological innovation
has shifted from simply seeking energy efficiency to solving severe comprehensive
social and environmental problems (Schot and Steinmueller, 2016). The more mature
the technology, the less it contributes to development, which explains why fossil
energy technologies, given their maturity, are failing to stimulate economic growth.
Meanwhile, the deepening of CE has transformed the technological driving force of
the economy into environmental efficiency promotion. This development of
pollution abatement technologies is conducive to the promotion of inclusive and
sustainable industrialization and contributes to sustainable development (Sugiawan
and Managi, 2019). Additionally, with the approach proposed by Cleaner Production
and Industry 4.0, new energy technologies can solve the deletion of resources for
sustainable development by applying new energy and raising efficiency (Hidayatno
et al., 2019). To some extent, hypothesis 1 is supported by pollution abatement and
new energy technologies.
The results of Models mlc and m1d show differentiated impacts of different
structural optimizations on economic growth. The coefficient of sr and se are
insignificant, while the coefficient of su is significantly negative. This shows that the
current level of industrial structural rationalization in China is relatively lower— as
the mean of the reverse index TL is 0.2619 and indicates an unbalanced
economy—and fail to induce significant economic growth. Concurrently, the
Chinese industry is not well positioned to support structural upgrading and release
the structural dividend, as de-industrialization is not aligned with the national
development trend. Reindustrialization (for example “Made in China 2025”) with
advanced technologies, high efficiencies, and a new business model can further
develop the structural dividend (Pugno, 2006), which is proposed in Industry 4.0
(Thames and Schaefer, 2016) and is an important part of China’s CE (Kerin and
Pham, 2019). Although China’s economy is undergoing a green transformation, the
relatively slower transition of its industrial structure ecologicalization (as shown by
Figure 3) has limited economic growth to some extent. Thus, hypothesis 2 has not be
19
verified in the national regression of China.

-----------------------------------------------------------------------------
Insert Table 4 here
-----------------------------------------------------------------------------
4.3 National regression and discussion with policy variables
Table 5 provides the results with policy variables. rd*tfp, rd*es, rd*bt, rd*pa,
ia*sc, ia*sr, ia*su, and ia*se are the cross-terms of corresponding policies and
intermediary variables.

-----------------------------------------------------------------------------
Insert Table 5 here
-----------------------------------------------------------------------------
In Table 5, comparing m2b and m3b to m3g, the coefficient of tfp in m2b is
negative but insignificant, while the coefficient of rd*tfp is significantly negative at
the 5% level, such that this does not meet theoretical expectations. This result is
explained by Models m3b to m3g, which contain the cross-terms of directed
technological or structural innovations and policy variables.
The coefficients of rd*es and rd*bt are both insignificant and only the coefficient
of rd*pa is significantly positive, which indicates that the innovation policy mainly
promotes economic growth by stimulating environment-biased technological
progress. This may be due to three key reasons. First, the rising environmental
constraints and the acceptance of CE within the economy encourage R&D
investment into environment-saving technology innovation for future benefit (Fujii
and Managi, 2019). Second, the relatively mature fossil energy technology makes it
difficult to enjoy more benefits of Industry 4.0 and further accelerates economic
development (Su and An, 2018). Third, the promotion of new energy technologies
for economic growth are mainly caused by other factors (i.e., the market) rather than
an R&D policy that has not switched its focus from imitation to innovation (Shi and
20
Wu, 2019). In summary, the guidance of innovation policies on absorbing the
technologies brought by Industry 4.0 and CE to drive energy and environment
efficiency for ultimate economy growth is unsatisfied in China. Therefore, policies
should not only strengthen R&D investment, consider the rational allocation of R&D
resources (Nakamura et al., 2018), and work to improve the technology trading
market mechanism. They should also link to the means of CE and selectively support
the progress of technologies that can meet the challenges of sustainability, as not all
Industry 4.0 technologies will significantly improve industrial performance (Schot
and Steinmueller, 2016; Dalenogare et al., 2018). In conclusion, hypothesis 3 is
supported by environment-related technological progress.
The coefficient of sc in m2b is significant and negative while the coefficient of
ia*sc is insignificant. This indicates that, from a comprehensive view, industrial
structural innovation hinders economic growth and that industrial structural change
is driven by the market rather than by policy. For multi-dimensional structural
changes, the coefficients of ia*su and ia*se are insignificant, and the coefficient of
ia*sr is significantly negative at the 5% level. These indicate that industrial policy
plays minor role in industrial structure optimization. Considering the negative but
insignificant coefficient of sr, which suffers from a low structural rationalization, it
appears that recent industry policies fail to impel the industrial structural change and
significantly accelerate the national economy growth. With the significantly negative
coefficient of su, the insignificance of ia*su means that without sufficient readiness
for servicelization, premature de-industrialization is unadvisable as it could cause
inefficient resource allocation. With the enforcement of Industry 4.0, manufacturing
is still an important value-added component of China’s economy, and this has been
recognized by China’s industrial policy. The coefficient of is*se is positive but not
significant, while the significantly positive coefficient of se in model m3g means
economic growth can be induced by market-driven structural ecologicalization to
some extent. Therefore, China’s industrial policy should incorporate green guidance
and promote economic growth by green industrialization with gradual promotion of
21
Industry 4.0 and CE. In general, the effect of China’s industrial policy is unsatisfied
in national regression. On one hand, this could be attributed to the improper
guidance of structural change within industrial policy. On the other hand, it may be
due to unmatched contextual conditions (i.e., an inflexible labor force, lagged
technologies, obsolete infrastructure, and social and cultural constraints) and
insufficient readiness that cannot endorse the guidance of policies in inducing
structural change (Mbate, 2016; Lin and Nowak, 2017; Dalenogare et al., 2018;
Tseng et al., 2019). Alternatively, the classified discussion on industrial policies may
be more suitable in future.
The results of control variables in Tables 4 and 5 show that, at the national level,
the coefficients of gov and email are significantly positive, indicating that
government intervention and information construction could promote China’s
economic development. With Industry 4.0 technologies and digital transformation,
the improvement of informatization has significantly promoted economic
development (Dlouha et al., 2017). The coefficients of fdi are insignificant, showing
that only cleaner foreign capital may have spillover effects on economic growth with
the transition to CE. The coefficients of agg are significantly negative, signifying
that industrial agglomeration does not improve the productivity of state-owned
enterprises and ultimately fails to accelerate national economic growth (Gokan et al.,
2019).

4.4 Regional regression and discussion

As the progress of Industry 4.0 technologies adoption and CE transition differ in
regions (Silvestri et al., 2020), it is necessary to further investigate the differences in
the dynamic mechanism of economic growth among different regions in China.
Accordingly, the samples are sub-grouped into eastern China, central China, and
western China. The regression results of the sub-samples analyses are shown in
Table 6.

-----------------------------------------------------------------------------
22
 Insert Table 6 here
-----------------------------------------------------------------------------
Table 6 shows that there is significant regional heterogeneity regarding the
driving forces behind economic growth. These drivers—the technological effect and
the structural effect—are considered in detail below.
Technological effect: In Model me1, both backstop technological progress and
environment conservation technological progress have significant positive effects on
eastern China’s economy, while energy-saving technological progress has a
significant negative effect. This indicates that environmental conservation
technological progress and backstop technological progress are major technological
driving forces of economic development in eastern China with the earlier
implementation of Industry 4.0 and CE. However, in me2, which introduces the
policy variables, the coefficients of rd*es, rd*bt, and rd*pa are in line with the
coefficients of es, bt, and pa. It can be concluded that innovation policies can
influence economic growth by inducing biased technological progress. That is, in the
context of Industry 4.0 and CE, the innovation policy works well in the eastern areas.
However, according to the negative coefficients of es and rd*es, it should be
recommended that future technology innovation policies focus on guiding the
adoption of Industry 4.0 and CE technologies to promote environment and new
energy efficiency rather than the utilization of fossil energy.
For central China, in Model mc1, the coefficient of es is significant and negative,
while pa is insignificant. Among the direct effects of technological progress, only
backstop technology has a promotion effect on economic growth. It can be found
that the coefficient of rd*es is insignificant and the coefficients of rd*bt and rd*pa
are both significant and positive in Model mc2. Therefore, we can conclude that
innovation policy can induce backstop technological progress and environmental
protection technological progress, further promoting central China’s economic
development in the context of Industry 4.0 adoption and CE transition.

23
 For western China, the coefficients of pa and rd*pa are significantly negative in
mc1 and mc2, indicating that innovation policy failed to accelerate new energy
technological progress for the consequent promotion on economic growth. In other
words, due to the urgent pursuit of the catch-up effect in the economy and lagged
acceptance of Industry 4.0 and CE in the western regions, it is not suitable and
economical to prematurely promote the application of new energy through
corresponding policy. The results for es, pa, rd*es, and rd*pa in mc1 and mc2 show
that the positive effect of energy-saving and environment conservation technological
progress on economic growth are mainly induced by the related policy. It appears
that using policy to lower environmental costs (Mboumboue and Njomo, 2016) and
impel sustainable industrialization for rapid economic growth is possible in the
relatively underdeveloped western China.
The effects of biased technological progress on economic growth show
significant heterogeneity across regions in the context of Industry 4.0 and CE. This
could be explained from the perspective of the match between technology selection
and factor endowments. The perceived value and adoption of similar technologies
will differ across regions according to differentiated readiness and acceptance of
Industry 4.0 and CE (Pacchini et al., 2019; Kuah and Wang, 2020) and the particular
characteristics of an economy (Dalenogare et al., 2018), leading to different effects
of technological progress (Acemoglu and Zilbotti, 2001; Mensah et al., 2019).
Furthermore, fiscal and environmental decentralization may lead to differences in the
interpretation and implementation of innovation policies across regions, especially
energy- and environment-related innovation policies, and produce a “race to the
bottom” effect (Wu et al., 2019).
Structural effect: In Model me1, for eastern China, the coefficients of sr and se
are both significantly positive, while the coefficient of se is insignificant. Compared
with the coefficients of the cross-terms in Model me2, this signifies that industrial
policy can drive structural rationalization and ecologicalization, and thereby induce
economic growth in the context of Industry 4.0 and CE. However, oversimplified
24
industry servicelization (by the ratio of the output value of the tertiary to that of the
secondary industry) may encumber eastern China’s economic development as
Industry 4.0 and CE make manufactures cleaner and popular again (de Sousa
Jabbour et al, 2018b; Morseletto, 2019).
In Model mc1, for central China, only the coefficient of sr is significantly
negative, signifying that a multi-dimensional industrial structural change does not
stimulate central regions’ economic growth. Nevertheless, the results of the
cross-terms of industrial policy and structural change illustrate that by disregarding
the failed direct effect of structural change, the government in central China can
implement industrial policies to adjust the direction of structural change, and thus
promote economic growth with the implementation of Industry 4.0 and CE.
In Model mw1, the coefficient for sr is significantly positive, su is significantly
negative, and se is insignificant. This implies that, with the lagging economy and
widespread brain drains, industrial structural rationalization with optimizing
personnel allocation can benefit the economy in western China. However, early
deindustrialization is not conducive to economic development as the manufacturing
sector is still the largest source of value-added in western China in the context of
Industry 4.0 and CE, and an imperfect industrial structure would damage the growth
potential of an independent economy (Lee and McKibbin, 2018). However,
industrial policy has failed to promote structural rationalization.
In summary, there is also significant regional heterogeneity in the structural
effect of industrial policy. The important features of industrial structural change are
that not all system components can change at the same time and/or at the same speed
(Cardinale and Scazzieri, 2018). Additionally, the guidance of policy varies within
regions as they vary in their absorption of Industry 4.0 and acceptance of CE
(Pacchini et al., 2019; Kuah and Wang, 2020). Therefore, different regions have
different industrial structures, which also have differentiated effects on the economy.
Thus, hypothesis 4 is supported by regional regression to some extent.
Simultaneously, when we consider the differentiation of policy selection and the
25
effects of local government competition under the “Chinese-style decentralization,”
the differentiation of industrial policy implementation is inevitable.

4.5 Robustness test

The robustness test re-estimates the above regression using the spatial
geographic distance weight matrix (WD) and the mixed weight matrix (WM). The
national regression results are shown in Table 7, and the regional regression results
based on WD and WM are shown in Tables 8 and 9, respectively. As the results of
the robustness test are generally consistent with our previously specified conclusions,
a detailed interpretation of the regression is omitted here.

-----------------------------------------------------------------------------
Insert Table 7 here
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Insert Table 8 here
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Insert Table 9 here
-----------------------------------------------------------------------------

5. Conclusion and Policy Implications

Industry 4.0 and CE have brought advanced technologies and suitable structures
for achieving sustainability (Yadav et al., 2020). It is reasonable to estimate the
outcome of Industry 4.0 and CE from the perspective of technological progress and
structural change. We detect the joint effect of biased technological progress and
multidimensional structural change on economic growth and conclude as follows. (1)
26
In the national regression, increased environmental efficiency and new energy
efficiency are the technological driving forces of economic development. However,
China has failed to stimulate economic growth by developing fossil energy
technology. Likewise, industrial structural upgrading is not suitable for China’s
current economy. With the deepening of the green economy, autogenous structural
ecologicalization is gradually playing a more prominent role in stimulating economic
development. (2) R&D inputs can support environmental technological progress for
subsequent economic development. (3) Region heterogeneity is obvious in regional
regression. The eastern region has an advantage in utilizing environmental
technology and backstop technology, as well as structural rationalization and
ecologicalization for further economic growth. Innovation and industrial policies
work well in eastern China. The driving force behind the central and western regions’
economies lies in the improvement of environmental technologies, meanwhile,
policy-driven structural ecologicalization has a positive effect on economic growth
in central and western China. Thus, the theoretical mechanism in the study will assist
researchers working in similar domains to develop new frameworks and perspectives
and ultimately improve the adoption of Industry 4.0 and CE. In addition, we provide
a new mode and an empirical case to estimate the joint effect of Industry 4.0 and CE
simultaneously.
Based on these conclusions, the following policy implications are proposed for
the promotion of Industry 4.0, CE, and further sustainability. (1) Connecting China’s
capability and the targets of Industrial 4.0 and CE, policy making and enforcement
should be based on the indigenization of Industrial 4.0 and CE. As different regions
have different readiness levels for experiencing Industry 4.0 and accepting CE, the
central government should have a specific understanding of Industry 4.0 and CE by
matching their direction and index with the target of national and local economy
development. Correspondingly, with a clear direction and criterion, policies can be
made and enforced with more flexibility and a better expectation for the successful
adoption of Industry 4.0 and the transition to CE. (2) Focusing on the acceptance of
27
and participation in Industry 4.0 and CE by all stakeholders, the government should
take the benefits and actions of all stakeholders into consideration to make full use of
the mechanism of markets. China has made Industry 4.0 adoption and CE transition
national strategies and promoted them with related policies. In the process of
adopting Industry 4.0 and CE, firms play an important role in absorbing and
developing the advanced technologies and the economy model with the guidance of
government’s policies. Innovation and industry policies should be optimized based
on their alignment with other stakeholders’ interests and actions. Thus, the
technological progress and structural change caused by Industry 4.0 and CE can
deliver positive outcomes on economic growth with a proper connection between the
government and the market, such as the 2030 Agenda Innovation Demonstration
Zone. (3) Considering the positive effects of cleaner technologies and green
industries, policy making should switch from promoting all technologies to
innovating urgent technologies and industries for earlier implementations of Industry
4.0 and CE. Due to the threat of pollution on the economy, technological progress on
environment conservation, new-energy technological progress, and industrial
structural ecologicalization have vital effects on economic growth where Industry
4.0 and CE are concerned. In particular, innovation policy should focus on
stimulating environment-related technological innovation and promoting the
utilization of new energy. Industry policy should pay more attention to accelerating
the process of green industrialization.
Although this study investigates the joint effect of industrial structural change
and directed technological progress on economic growth in the context of Industry
4.0 and CE, there are still some limitations. In particular, if a lager sample or
longer-period data can be used to the economic regression, the result might be
considered more pertinent, and the associated suggestions would be more accurate,
applicable, and efficient. Nevertheless, our results offer important implications for
policymakers in China to drive the implementation of Industry 4.0 and CE
simultaneously.
28
Acknowledgements

This work was supported by the National Natural Science Foundation of China
(Grant Nos. 71934001, 71974001, 71503001, 71804001), the Planning Project of
Philosophy and Social Science Research in Anhui Province (Grant No.
AHSKQ2017D03), and Anhui Natural Science Research Project(Grant No.
KJ2019A0649).

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Table Captions
Table 1. Summary statistics.
Table 2. Biased technological progress.
Table 3. Moran's I index test results of provincial GRP, 2000-2016.
Table 4. National regression results based on WE.
Table 5. National regression results with policy variables based on WE.
Table 6. Regional regression results based on WE.
Table 7. National regression results based on WD and WM.
Table 8. Regional regression results based on WD.
Table 9. Regional regression results based on WM.

34
Table 1. Summary statistics.
Variable Description Obs Mean Std. Dev. Min Max Median

Lngrp Logarithm of regional grp 510 8.653 1.065 5.574 11.029 8.738

es Fossil energy efficiency 510 0.645 0.380 0.128 6.319 0.618

bt Environmental efficiency 510 0.838 6.514 0.000 123.670 0.213

pa New energy efficiency 510 0.488 0.402 0.066 6.776 0.414

sr Rationalization of industrial structure 510 0.615 0.156 0.000 0.860 0.634

su Upgrading of industrial structure 510 0.939 0.464 0.494 4.166 0.831

se Ecologicalization of industrial structure 510 0.588 0.146 0.276 0.934 0.578

The ratio of R&D expenditure and

rd 510 0.089 0.131 0.003 0.943 0.054
technology contracting to grp

ia The proportion of keywords 510 0.008 0.002 0.004 0.015 0.007

fdi The ratio of FDI to grp 510 -4.319 1.777 -12.346 -1.573 -4.060

gov The Government’s financial expenditure 510 7.180 1.088 4.108 9.506 7.227

The per capita post and

email 510 -3.006 0.482 -4.656 -1.492 -2.972
telecommunications volumes

Location entropy index of the secondary

agg 510 0.963 0.154 0.419 1.219 0.995
industry calculated by output value

Note: data sourced from calculations by the authors based on China’s statistical yearbooks,

environmental statistical yearbooks, and government work reports.

35
 Table 2. Biased technological progress.
Fossil energy efficiency Non-fossil energy efficiency Environmental efficiency
Region Province
2000 2007 2016 Average 2000 2007 2016 Average 2000 2007 2016 Average

Beijing 0.359 0.542 1.097 0.635 0.062 0.348 0.673 0.353 0.362 0.609 1.057 0.646

Tianjin 0.612 0.448 1.067 0.686 0.856 0.395 0.845 0.928 0.708 0.574 1.024 0.732

Hebei 0.512 0.275 0.506 0.404 0.614 0.216 0.363 0.268 0.512 0.228 0.255 0.241

Liaoning 0.390 0.458 0.636 0.555 2.702 0.150 0.224 0.376 0.431 0.323 0.331 0.411

Shanghai 0.689 0.809 1.184 0.843 5.714 0.922 0.944 1.142 0.574 0.828 1.336 0.846
Eastern
Jiangsu 1.476 0.623 0.912 0.823 1.895 0.225 0.384 0.404 0.870 0.463 0.744 0.586
region
Zhejiang 1.014 0.574 1.005 0.760 0.059 0.094 0.128 0.123 0.937 0.528 0.845 0.598

Fujian 2.027 0.890 1.387 1.053 0.477 0.215 0.126 0.290 1.712 0.465 0.946 0.636

Shandong 0.827 1.007 0.727 0.717 0.915 0.435 0.738 0.838 0.841 0.902 0.552 0.587

Guangdong 0.851 0.923 1.178 1.011 1.290 1.190 2.686 0.910 0.798 0.803 0.899 0.870

Hainan 1.161 0.783 0.961 0.861 0.811 0.107 0.184 0.229 1.751 0.808 0.905 0.970

Shanxi 0.303 0.145 0.295 0.286 0.097 0.288 1.054 0.354 0.178 0.117 0.200 0.155

Inner 0.588 0.204 0.773 0.362 0.303 0.246 0.780 0.342 0.514 0.138 0.455 0.236

Mongolia

Jilin 0.602 0.367 1.300 0.574 0.050 0.147 1.130 0.373 0.705 0.290 1.467 0.474

Central Heilongjiang 1.092 0.760 0.685 0.713 3.073 0.328 0.470 0.500 1.356 0.834 0.542 0.750

region Anhui 0.889 0.775 0.772 0.719 2.807 0.367 0.517 0.633 1.138 0.326 0.453 0.501

Jiangxi 1.284 0.512 0.831 0.748 0.060 0.123 0.183 0.125 0.677 0.261 0.350 0.336

Henan 1.010 0.404 0.824 0.637 0.339 0.248 1.254 0.386 0.917 0.334 0.649 0.463

Hubei 0.912 0.678 1.018 0.808 0.060 0.147 0.102 0.077 0.823 0.362 0.729 0.501

Hunan 1.894 0.641 0.897 0.815 0.074 0.014 0.093 0.134 1.006 0.329 0.693 0.469

Guangxi 1.873 0.599 1.049 0.852 0.243 0.025 0.334 0.184 0.658 0.223 0.708 0.360

Western Chongqing 0.732 0.386 0.830 0.539 0.238 0.070 0.111 0.090 0.201 0.298 0.623 0.341

region Sichuan 0.988 0.524 0.881 0.634 0.137 0.021 0.060 0.073 0.586 0.329 0.584 0.402

Guizhou 0.285 0.229 0.511 0.288 0.020 0.036 0.186 0.052 0.218 0.166 0.365 0.193

36
 Yunnan 0.989 0.361 0.980 0.597 0.082 0.036 0.228 0.095 0.799 0.272 0.483 0.337

Shaanxi 0.674 0.348 0.605 0.459 0.049 0.213 1.157 0.427 0.311 0.240 0.503 0.304

Gansu 0.135 0.287 0.557 0.381 0.004 0.022 0.061 0.057 0.189 0.280 0.321 0.293

Qinghai 0.277 0.243 1.259 0.415 0.019 0.024 0.385 0.081 0.418 0.214 0.369 0.250

Ningxia 0.820 0.136 1.135 0.523 0.000 0.170 0.917 0.970 0.785 0.152 1.317 0.514

Xinjiang 0.385 0.248 0.302 0.303 0.015 0.192 0.375 0.312 0.273 0.243 0.333 0.286

Total 0.855 0.506 0.872 0.633 0.769 0.234 0.556 0.371 0.708 0.398 0.668 0.476

Note: Due to space constraints, only part of the data for biased technological progress is listed. The

values in the "Average" columns are the average values of corresponding technological progress from

2000 to 2016. Data sourced from calculations by the authors based on China’s statistical yearbooks

and environmental statistical yearbooks.

37
Table 3. Moran's I index test results of provincial GRP, 2000–2016.
WE 2000 2001 2002 2003 2004 2005 2006 2007

0.177** 0.213** 0.263*** 0.187** 0.184** 0.183*** 0.222** 0.239**

lngrp
(2.147) (2.545) (3.187) (2.203) (2.410) (2.928) (2.563) (2.510)

2008 2009 2010 2011 2012 2013 2014 2015 2016

0.277*** 0.231*** 0.232*** 0.169** 0.194** 0.170** 0.201** 0.140** 0.179***

lngrp
(3.375) (2.883) (3.146) (2.201) (2.474) (2.270) (2.544) (2.074) (2.472)

Note: *, **, and *** refer to significance at the 10%, 5%, and 1% levels, respectively. Figures in

parentheses are Z statistics. Data sourced from calculations by the authors based on China’s statistical

yearbooks.

38
Table 4. National regression results based on WE.
Variable m1a m1b m1c m1d

L.lngrp 0.910***(0.0252) 0.929***(0.0238) 0.927***(0.0224) 0.940***(0.0209)

0.000241(0.000411) 0.000353(0.00034
tfp
3)

sc -0.00797***(0.00286) -0.00398(0.00302)

es -0.0419***(0.00932) -0.0377***(0.00822)

bt 0.000543**(0.000214) 0.000410***(0.000119)

pa 0.0202***(0.0071) 0.0223***(0.00623)

sr -0.0273(0.0286) -0.0164(0.0273)

su -0.0590***(0.0171) -0.0454***(0.0166)

se -0.00224(0.0148) 0.0158(0.0159)

fdi 0.000740(0.00285) 0.000151(0.00249) 0.00206(0.00263) 0.00144(0.00228)

gov 0.0647***(0.0144) 0.0567***(0.0138) 0.0523***(0.0138) 0.0476***(0.0133)

email 0.0175***(0.00313) 0.0157***(0.00292) 0.0168***(0.00290) 0.0153***(0.00268)

agg -0.0210(0.0335) 0.00359(0.0335) -0.0999***(0.0374) -0.0685*(0.0387)

rho -0.0199(0.0323) -0.0290(0.0306) -0.0113(0.0259) -0.0194(0.0253)

Obs 480 480 480 480

R-squared 0.998 0.999 0.999 0.999

Log-pseudo 1263.7492 1289.1948 1299.3146 1316.2651

likelihood

Note: *, **, and *** refer to significance at the 10%, 5%, and 1% levels, respectively. Figures in

parentheses are standard errors. Data sourced from calculations by the authors based on China’s

statistical yearbooks and environmental statistical yearbooks.

39
 Table 5. National regression results with policy variables based on WE.
Variable m2a m2b m3a m3b m3c m3d m3e m3f m3g

0.920*** 0.910*** 0.940*** 0.961*** 0.962*** 0.963*** 0.970*** 0.972*** 0.971***

L.lngrp
(0.0273) (0.0259) (0.0210) (0.0151) (0.0151) (0.0138) (0.0137) (0.0135) (0.0136)

0.000204 -0.000158
tfp
(0.000329) (0.000174)

-0.00789**
-0.00668** *
sc
(0.00261)
(0.00278)

-0.0373*** -0.0356*** -0.0387*** -0.0492*** -0.0494*** -0.0482*** -0.0469***

es
(0.00890) (0.00726) (0.00712) (0.0102) (0.00978) (0.00990) (0.00993)

0.000403** 0.000379**
* *
0.000703** 0.000563** 0.000575** 0.000589** 0.000583**
bt
(0.000335) (0.000273) (0.000282) (0.000284) (0.000278)
(0.000123) (6.75e-05)

0.0221*** 0.0206*** 0.0194*** 0.0307*** 0.0307*** 0.0296*** 0.0286***

pa
(0.00659) (0.00586) (0.00646) (0.00979) (0.00946) (0.00957) (0.00946)

-0.0170 0.00173 0.00233 0.00376 -0.00327 -0.00122 0.00266

sr
(0.0278) (0.0264) (0.0262) (0.0255) (0.0243) (0.0248) (0.0222)

-0.0446*** -0.0728*** -0.0691*** -0.0687*** -0.0698*** -0.0719*** -0.0719***

su
(0.0148) (0.0121) (0.0126) (0.0116) (0.0116) (0.0129) (0.0130)

0.0156 0.0188 0.0200 0.0222 0.0233 0.0231 0.0253*

se
(0.0157) (0.0147) (0.0147) (0.0148) (0.0145) (0.0144) (0.0139)

-0.122*** -0.00733
rd
(0.0423) (0.0383)

-0.00577 -0.00256
ia
(0.00622) (0.00583)

-0.0187**
rd*tfp
(0.00733)

-0.000227
ia*sc
(0.00457)

0.204*** 0.193*** -0.0956 -0.0618 -0.0439 -0.0341

rd*es
(0.0457) (0.0447) (0.103) (0.0975) (0.0930) (0.0968)

0.00934 0.00612 0.00656 0.00684 0.00669

rd*bt
(0.00834) (0.00678) (0.00704) (0.00707) (0.00692)

40
 0.320** 0.283** 0.254** 0.245**
rd*pa
(0.132) (0.125) (0.115) (0.118)

-0.0823*** -0.0733*** -0.0585**

ia*sr
(0.0244) (0.0254) (0.0263)

-0.0121 -0.0116
ia*su
(0.0123) (0.0122)

0.0500
ia*se
(0.0531)

0.00150 0.000987 0.00156 0.00128 0.000918 0.000541 0.000701 0.000780 0.000410

fdi
(0.00242) (0.00280) (0.00232) (0.00217) (0.00215) (0.00217) (0.00207) (0.00207) (0.00197)

0.0624*** 0.0644*** 0.0474*** 0.0426*** 0.0422*** 0.0417*** 0.0387*** 0.0385*** 0.0397***

gov
(0.0142) (0.0144) (0.0132) (0.0121) (0.0123) (0.0116) (0.0114) (0.0113) (0.0113)
*** *** *** *** *** *** *** ***
0.0185 0.0176 0.0153 0.0139 0.0137 0.0138 0.0134 0.0134 0.0135***
email
(0.00305) (0.00317) (0.00296) (0.00261) (0.00256) (0.00243) (0.00244) (0.00244) (0.00240)

-0.0245 -0.0213 -0.0672* -0.104*** -0.0969*** -0.0887*** -0.0920*** -0.0962*** -0.0938***

agg
(0.0338) (0.0335) (0.0378) (0.0311) (0.0314) (0.0304) (0.0300) (0.0308) (0.0307)
* * *
-0.0235 -0.0190 -0.0197 -0.0325 -0.0332 -0.0342 -0.0353 -0.0369 -0.0377*
rho
(0.0341) (0.0327) (0.0254) (0.0210) (0.0213) (0.0203) (0.0197) (0.0197) (0.0199)

Obs 480 480 480 480 480 480 480 480 480

R2 0.999 0.999 0.999 0.999 0.999 0.999 0.999 0.999 0.999

Log-pseudo
1274.7548 1264.8825 1316.2465 1333.1319 1334.1197 1339.6096 1341.6473 1341.5646 1343.4934
likelihood

Note: *, **, and *** respectively refer to significance at the 10%, 5%, and 1% levels. Data in

parentheses are standard errors. Data sourced from calculations by the authors based on China’s

statistical yearbooks, environmental statistical yearbooks, and government work reports.

41
Table 6. Regional regression results based on WE.
Eastern China Central China Western China
Variable
me1 me2 mc1 mc2 mw1 mw2

0.919*** 0.944*** 0.872*** 0.877*** 0.942*** 0.835***

L.lngrp
(0.0419) (0.0294) (0.0230) (0.0287) (0.0222) (0.0392)

-0.0705*** -0.102*** -0.0594*** -0.0417 -0.0409*** -0.00430

es
(0.0103) (0.00961) (0.0163) (0.0270) (0.00887) (0.0103)

0.000326*** 0.000452*** 0.00550*** -0.0135*** -0.000909* -0.0199***

bt
(5.59e-05) (9.08e-05) (0.00129) (0.00144) (0.000469) (0.00598)

0.0267** 0.0558*** -0.00676 0.0883*** 0.00993 0.223***

pa
(0.0104) (0.0102) (0.0192) (0.0262) (0.00846) (0.00819)

0.181* 0.154* -0.169** -0.123** 0.0376*** 0.0464***

sr
(0.0929) (0.0805) (0.0806) (0.0595) (0.0126) (0.0132)

0.0122 -0.0388* -0.0217 -0.0229 -0.0588*** -0.0693***

su
(0.0162) (0.0220) (0.0179) (0.0260) (0.0150) (0.0174)

0.145*** 0.143*** 0.0177 -0.00733 0.0160 0.0949***

se
(0.0299) (0.0232) (0.0268) (0.0310) (0.0111) (0.0158)

-0.236*** -0.524 0.886***

rd*es
(0.0819) (0.577) (0.243)

0.00360** 0.432*** -0.283***

rd*bt
(0.00182) (0.0917) (0.0952)

0.562*** 2.756*** 3.829***

rd*pa
(0.135) (0.666) (0.219)

0.352*** 0.121** 0.0357

ia*sr
(0.0687) (0.0526) (0.0300)

-0.00364 -0.0309* 0.0532

ia*su
(0.0110) (0.0179) (0.0408)

0.367*** 0.180*** 0.273***

ia*se
(0.0752) (0.0151) (0.0399)

0.00490 0.00202 0.000396 0.00383 0.00213 -0.00783***

fdi
(0.00465) (0.00420) (0.00594) (0.00415) (0.00204) (0.00214)

0.0128 0.00982 -0.0101 0.0286 0.0362** 0.0419***

gov
(0.0355) (0.0272) (0.0181) (0.0179) (0.0157) (0.0151)

email 0.0105*** 0.0103*** 0.0133*** 0.00973*** 0.00752 -0.00259

42
 (0.00362) (0.00339) (0.00475) (0.00237) (0.00492) (0.00438)

0.123** 0.0488 0.0141 0.00403 -0.0682* -0.0779*

edu
(0.0549) (0.0597) (0.0593) (0.0764) (0.0413) (0.0412)

0.0299 0.00958 0.142*** 0.0797 0.00213 0.0952**

rho
(0.0379) (0.0321) (0.0447) (0.0496) (0.0299) (0.0371)

Obs 176 176 144 144 160 160

R2 0.998 0.998 0.993 0.995 0.999 0.988

Log-pseudo likelihood 465.1496 446.7117 412.9898 411.2234 484.7313 310.3158

Note: *, **, and *** refer to significance at the 10%, 5%, and 1% levels, respectively. Figures in

parentheses are standard errors. Data sourced from calculations by the authors based on China’s

statistical yearbooks, environmental statistical yearbooks, and government work reports.

43
Table 7. National regression results based on WD and WM.
WD WM
Variable
m1d m2b m3f m1d m2b m3g
*** *** *** *** ***
0.924 0.925 0.961 0.924 0.925 0.961***
L.lngrp
(0.0248) (0.0245) (0.0169) (0.0248) (0.0245) (0.0169)
*** *** *** *** ***
-0.0371 -0.0368 -0.0459 -0.0371 -0.0368 -0.0459***
es
(0.00800) (0.00868) (0.00987) (0.00800) (0.00868) (0.00987)
*** *** ** *** ***
0.000395 0.000390 0.000577 0.000395 0.000390 0.000577**
bt
(0.000114) (0.000118) (0.000276) (0.000114) (0.000118) (0.000276)
*** *** *** *** ***
0.0220 0.0218 0.0278 0.0220 0.0218 0.0278***
pa
(0.00606) (0.00644) (0.00933) (0.00606) (0.00644) (0.00933)
-0.0162 -0.0166 0.00347 -0.0162 -0.0166 0.00347
sr
(0.0281) (0.0288) (0.0224) (0.0281) (0.0288) (0.0224)
*** *** *** *** ***
-0.0455 -0.0448 -0.0715 -0.0455 -0.0448 -0.0715***
su
(0.0159) (0.0146) (0.0132) (0.0159) (0.0146) (0.0132)
*
0.0163 0.0160 0.0256 0.0163 0.0160 0.0256*
se
(0.0157) (0.0154) (0.0139) (0.0157) (0.0154) (0.0139)
-0.0274 -0.0274
rd*es
(0.0950) (0.0950)
0.00658 0.00658
rd*bt
(0.00686) (0.00686)
**
0.240 0.240**
rd*pa
(0.116) (0.116)
**
-0.0583 -0.0583**
ia*sr
(0.0266) (0.0266)
-0.0102 -0.0102
ia*su
(0.0123) (0.0123)
0.0500 0.0500
ia*se
(0.0537) (0.0537)
-0.00577 -0.00577
rd
(0.0368) (0.0368)
-0.00242 -0.00242
ia
(0.00574) (0.00574)

Control variable Yes Yes Yes Yes Yes Yes

0.00157 0.00132 -0.0277 0.00157 0.00132 -0.0277

rho
(0.0337) (0.0337) (0.0271) (0.0337) (0.0337) (0.0271)
Observations 480 480 480 480 480 480
R-squared 0.999 0.999 0.999 0.999 0.999 0.999
Log-pseudo
1319.316 1319.32 1345.212 1319.316 1319.32 1345.212
likelihood

44
Note: *, **, and *** refer to significance at the 10%, 5%, and 1% levels, respectively. Figures in

parentheses are standard errors. Data sourced from calculations by the authors based on China’s

statistical yearbooks, environmental statistical yearbooks, and government work reports.

45
Table 8. Regional regression results based on WD.
Eastern China Central China Western China
Variable
me1 me2 mc1 mc2 mw1 mw2
*** *** *** *** ***
0.935 0.949 0.948 0.906 0.968 0.845***
L.lngrp
(0.0451) (0.0311) (0.0298) (0.0318) (0.0271) (0.0487)
*** *** *** * ***
-0.0733 -0.103 -0.0770 -0.0558 -0.0421 -0.000441
es
(0.0100) (0.00907) (0.0146) (0.0290) (0.00914) (0.0116)
*** *** *** *** **
0.000335 0.000458 0.00565 -0.0107 -0.00107 -0.0207***
bt
(5.73e-05) (8.96e-05) (0.00147) (0.00168) (0.000441) (0.00628)
*** *** ***
0.0275 0.0556 0.00683 0.0855 0.0121 0.223***
pa
(0.0103) (0.00982) (0.0189) (0.0291) (0.00882) (0.0106)
* ** * ***
0.178 0.156 -0.126 -0.112 0.0388 0.0467***
sr
(0.0919) (0.0779) (0.0879) (0.0618) (0.0132) (0.0138)
* *** ***
0.0128 -0.0387 -0.0516 -0.0359 -0.0694 -0.0789***
su
(0.0146) (0.0216) (0.0198) (0.0298) (0.0149) (0.0170)
*** ***
0.142 0.141 0.0116 -0.00944 0.0199 0.102***
se
(0.0298) (0.0222) (0.0326) (0.0363) (0.0131) (0.0176)
***
-0.233 -0.599 0.915***
rd*es
(0.0830) (0.609) (0.240)
* ***
0.00351 0.354 -0.295***
rd*bt
(0.00184) (0.115) (0.0992)
*** ***
0.563 2.514 3.871***
rd*pa
(0.134) (0.750) (0.267)
***
0.357 0.0778 0.0414
ia*sr
(0.0686) (0.0523) (0.0312)
**
-0.00403 -0.0302 0.0633
ia*su
(0.0111) (0.0150) (0.0419)
*** ***
0.371 0.162 0.280***
ia*se
(0.0747) (0.0211) (0.0429)

Control variable Yes Yes Yes Yes Yes Yes

0.0220 0.00225 0.173*** 0.0791 -0.00616 0.0910**

rho
(0.0375) (0.0326) (0.0603) (0.0524) (0.0327) (0.0427)
Observations 176 176 144 144 160 160
R-squared 0.998 0.998 0.995 0.996 0.999 0.992
Log-pseudo
465.1294 445.9579 401.9933 419.6787 484.6292 305.0338
likelihood

Note: *, **, and *** refer to significance at the 10%, 5%, and 1% levels, respectively. Figures in

parentheses are standard errors. Data sourced from calculations by the authors based on China’s

statistical yearbooks, environmental statistical yearbooks, and government work reports.

46
Table 9. Regional regression results based on WM.
Eastern China Central China Western China
me1 me2 mc1 mc2 mw1 mw2
*** *** *** *** ***
0.935 0.949 0.948 0.906 0.968 0.845***
L.lngrp
(0.0451) (0.0311) (0.0298) (0.0318) (0.0271) (0.0487)
*** *** *** * ***
-0.0733 -0.103 -0.0770 -0.0558 -0.0421 -0.000441
es
(0.0100) (0.00907) (0.0146) (0.0290) (0.00914) (0.0116)
*** *** *** *** **
0.000335 0.000458 0.00565 -0.0107 -0.00107 -0.0207***
bt
(5.73e-05) (8.96e-05) (0.00147) (0.00168) (0.000441) (0.00628)
*** *** ***
0.0275 0.0556 0.00683 0.0855 0.0121 0.223***
pa
(0.0103) (0.00982) (0.0189) (0.0291) (0.00882) (0.0106)
* ** * ***
0.178 0.156 -0.126 -0.112 0.0388 0.0467***
sr
(0.0919) (0.0779) (0.0879) (0.0618) (0.0132) (0.0138)
* *** ***
0.0128 -0.0387 -0.0516 -0.0359 -0.0694 -0.0789***
su
(0.0146) (0.0216) (0.0198) (0.0298) (0.0149) (0.0170)
0.142*** 0.141*** 0.0116 -0.00944 0.0199 0.102***
se
(0.0298) (0.0222) (0.0326) (0.0363) (0.0131) (0.0176)
***
-0.233 -0.599 0.915***
rd*es
(0.0830) (0.609) (0.240)
* ***
0.00351 0.354 -0.295***
rd*bt
(0.00184) (0.115) (0.0992)
*** ***
0.563 2.514 3.871***
rd*pa
(0.134) (0.750) (0.267)
***
0.357 0.0778 0.0414
ia*sr
(0.0686) (0.0523) (0.0312)
**
-0.00403 -0.0302 0.0633
ia*su
(0.0111) (0.0150) (0.0419)
*** ***
0.371 0.162 0.280***
ia*se
(0.0747) (0.0211) (0.0429)
***
0.0220 0.00225 0.173 0.0791 -0.00616 0.0910**
rho
(0.0375) (0.0326) (0.0603) (0.0524) (0.0327) (0.0427)
Observations 176 176 144 144 160 160
R-squared 0.998 0.998 0.995 0.996 0.999 0.992
Log-pseudo
465.1294 445.9579 401.9933 419.6787 484.6292 305.0338
likelihood

Note: *, **, and *** refer to significance at the 10%, 5%, and 1% levels, respectively. Figures in

parentheses are standard errors. Data sourced from calculations by the authors based on China’s

statistical yearbooks, environmental statistical yearbooks, and government work reports.

47
Figure Captions
Fig. 1. The framework of economic growth under industry 4.0, cleaner production,
and circular economy.
Fig. 2. The mechanisms through which technological progress and structural change
affect economic growth.
Fig. 3. The industrial structure of each Chinese province from 2000-2016.

48
 Industry 4.0 & Environmentally friendly
Cleaner production technological progress
Economic
development
Multidimensional
Circular economy
industrial structural change

Figure 1. The framework of economic growth under industry 4.0, cleaner production,
and circular economy.

49
 Energy-saving technological progress

Innovation policy Pollution abatement technological progress Technological

progress

Backstop technological progress

Economic
growth
Industrial structural rationalization

Industrial policy Structural

Industrial structural upgrading
change

Industrial structural ecologicalization

Figure 2. The mechanisms through which technological progress and structural

change affect economic growth.

50
 (a) Industrial structural rationalization

(b) Industrial structural upgrading

(c) Industrial structural ecologicalization

Figure 3. The industrial structure of each Chinese province from 2000-2016.
Note: The numbers from 1 to 30 represent, in order: Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia,

Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi, Shandong, Henan,

Hubei, Hunan, Guangdong, Guangxi, Hainan, Chongqing, Sichuan, Guizhou, Yunnan, Shaanxi,

Gansu, Qinghai, Ningxia, and Xinjiang. Data sourced from calculations by the authors based on the

China’s statistical yearbooks and environmental statistical yearbooks.

51
Disclosure statement: No potential conflict of interest was reported

by the authors.