From Innovation to Green: Does China’s Innovative City Construction Contribute to Green Development?

Abstract

ABSTRACT China’s government has launched the innovative city pilot (ICP) policy since 2008 and taken green development as the principle goal of innovative city construction. However, whether or not the ICP policy shapes green development remains largely unknown. Leveraging variation in the timing of the ICP policy implementation across cities, we investigate the causal impact of innovative city construction on green development, as measured by green total-factor productivity (GTFP). Our staggered difference-in-differences (DID) estimator shows that cities which implement the ICP policy experience a 5.3% increase in GTFP. This effect appears one year after the introduction of ICP policy and shows an upward trend over time. Our mechanism analysis further confirms that the ICP policy effect is driven by green innovation effect, which is realized through the support of innovation policy and increased investment in innovation. Finally, substantial heterogeneity is explained by geographic location, environmental constraint, resource endowment, city size and different levels of innovation. Our paper underscores the pivotal role of innovative cities in promoting green development, which warrants nationwide expansion.