Judicial empowerment and green productivity: causal evidence from China’s environmental public interest litigation pilot

Abstract

Environmental degradation demands innovative governance instruments that reconcile economic growth with ecological sustainability. This study provides novel causal evidence on the economic returns of judicial reform in environmental governance by exploiting China’s Environmental Public Interest Litigation (EPIL) pilot as a quasi-natural experiment. Unlike administrative regulation, EPIL introduces judicial deterrence, liability pressure, and public participation, creating distinct incentives for corporate environmental compliance. We examine the short-run effect of this judicial innovation on urban green total factor productivity (GTFP) using a panel of Chinese prefecture-level cities from 2011 to 2016. Employing a difference-in-differences design with propensity score matching, we find that the pilot significantly increased GTFP. Mechanism analyses indicate that the productivity gains were driven by industrial structure optimization and green technological innovation. Heterogeneity analysis reveals larger effects in inland regions, lower-administrative-hierarchy cities, and less marketized areas. These findings highlight the role of judicial empowerment in promoting sustainable development and offer policy implications for designing context-sensitive environmental governance.