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Do Environmental Regulations Promote or Inhibit Cities’ Innovation Capacity? Evidence from China

Author

Listed:
  • Xiaowen Zeng

    (The Faculty of Economics, Guangdong University of Finance & Economics, Guangzhou 510320, China)

  • Ming Jin

    (School of Economics, Zhejiang University of Finance and Economics, Hangzhou 310018, China)

  • Shuang Pan

    (School of Accountancy, Jiangxi University of Finance and Economics, Nanchang 330013, China)

Abstract

The “Porter Hypothesis” proposes that appropriate environmental regulations would promote firm innovation. This study aims to build a theoretical model for illustrating the impact and mechanism of environmental regulation on urban innovation through a panel of 281 Chinese prefecture-level cities during 2003–2016. The results indicated that an increase in environmental regulation markedly suppressed the innovative capacity of Chinese cities during the sample period. This inhibitory effect is primarily transmitted through two mediating variables: lower regional fiscal revenue and reduced manufacturing output. Moreover, improved regional economic development level helps generate positive incentives for environmental regulation and mitigate its inhibitions to innovation. Environmental regulation and urban innovation might have a non-linear U-shape relation, with the former helping improve urban innovation capacity upon reaching a particular level.

Suggested Citation

  • Xiaowen Zeng & Ming Jin & Shuang Pan, 2022. "Do Environmental Regulations Promote or Inhibit Cities’ Innovation Capacity? Evidence from China," IJERPH, MDPI, vol. 19(24), pages 1-21, December.
    • Handle: RePEc:gam:jijerp:v:19:y:2022:i:24:p:16993-:d:1006875
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    References listed on IDEAS

    as
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    2. Wang, Yan & Shen, Neng, 2016. "Environmental regulation and environmental productivity: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 758-766.
    3. Pan, Xiongfeng & Ai, Bowei & Li, Changyu & Pan, Xianyou & Yan, Yaobo, 2019. "Dynamic relationship among environmental regulation, technological innovation and energy efficiency based on large scale provincial panel data in China," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 428-435.
    4. Guojun He & Shaoda Wang & Bing Zhang, 2020. "Watering Down Environmental Regulation in China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 2135-2185.
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    6. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
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    Cited by:

    1. Zihao Wu & Ye Wang, 2023. "Does Heterogeneous Environmental Regulation Induce Regional Green Economic Growth? Evidence from China," Sustainability, MDPI, vol. 15(12), pages 1-14, June.

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