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The Impact of Exogenous Pollution on Green Innovation

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  • Wang, Ying
  • Woodward, Richard T.
  • Liu, Jingyue

Abstract

Does environmental quality affect firms’ activities that might improve that quality? In this paper, we use China's public heating policy as a quasi-experiment to investigate the impact of exogenous pollution differences on green innovation behavior. We use a regression discontinuity model, and carry out a suite of robustness tests. We consistently find that firms located in cities with an exogenous source of heavy pollution tend to adopt green innovation at a lower rate while we find no difference in the rate at which they adopt non-green innovation. We find a strong causal effect: being north of the boundary, where pollution levels are higher, leads firms to adopt less green innovation. Firms located in the heating areas report roughly 1 less green innovation per billion RMB of assets, a substantial difference given the average number of green innovations per billion RMB of assets of northern firms is 0.641.
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Suggested Citation

  • Wang, Ying & Woodward, Richard T. & Liu, Jingyue, 2021. "The Impact of Exogenous Pollution on Green Innovation," 2021 Annual Meeting, August 1-3, Austin, Texas 312705, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea21:312705
    DOI: 10.22004/ag.econ.312705
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    2. Bowen Zheng & Xiaoyu Wu & Xiaotong Huo & Shuyang Wang, 2024. "Can low-carbon cities pilot policy promote enterprise sustainable development? Quasi-experimental evidence from China," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-27, May.
    3. Han Long & Gen‐Fu Feng & Qiang Gong & Chun‐Ping Chang, 2023. "ESG performance and green innovation: An investigation based on quantile regression," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 5102-5118, November.
    4. Jing Tang & Shilong Li, 2022. "How Do Environmental Regulation and Environmental Decentralization Affect Regional Green Innovation? Empirical Research from China," IJERPH, MDPI, vol. 19(12), pages 1-16, June.
    5. Long, Xianling & Wang, Zhiqiang, 2025. "From heat to high-tech: How innovation responds to climate change," Journal of Development Economics, Elsevier, vol. 176(C).

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