Innovation and energy productivity: An empirical study of the innovative city pilot policy in China✰

Abstract

• The effects of China's innovative city pilot policy (ICPP) on energy productivity are investigated. • The empirical findings show that the ICPP leads to an economically and statistically significant improvement in energy productivity. • The magnitude of increase is estimated to be around 15% using the DID and matched DID methods. • The heterogeneous effects, robustness checks and mechanism analysis are also examined. Technological innovation reduces energy costs, accelerates energy transition, and is a key driver of economic growth. However, it has inconclusive effects on energy productivity, which is calculated as the ratio of economic output to energy consumption. In this study, we empirically investigated the effects of China's innovative city pilot policy (ICPP) on energy productivity using a difference-in-differences (DID) framework. The empirical findings revealed that in China, the implementation of the ICPP has led to an economically and statistically significant improvement in energy productivity and the magnitude of increase was estimated to be approximately 15% based on DID and matched DID analyses. We tested and confirmed the robustness of our results and conducted mechanism analysis to examine the three channels through which the ICPP exerts its effect on energy productivity, namely innovation quality, research and development expenditure, and innovation behavior.