Environmental Regulation, Technical Change, and Green Innovation: Evidence From China's Key Cities for Air Pollution Control Policy

Haiwei Jiang, Shiyuan Pan, Miaojie Yu and Tenglong Zhong

Review of Development Economics, 2026, vol. 30, issue 2, 1234-1247

Abstract: This paper measures the green innovation of Chinese firms from 1998 to 2007 according to the OECD classification of environment‐related technologies. We utilize an environmental regulation policy targeting Chinese cities as a quasi‐natural experiment and propose a difference‐in‐differences (DID) model with different intensities to investigate the level effects of environmental regulation on firms' green innovation. We mainly obtain three findings. First, after the treatment, compared with firms in the control group, the number of green patents of firms increases by approximately 13.9% for a one standard deviation increase in environmental regulation stringency in the treated cities. Second, environmental regulation induces firms to make technical changes, shifting firms from conducting non‐green innovation to green innovation. Finally, environmental regulation has a more pronounced impact on green innovation for firms with high pollution emission intensity.

Date: 2026
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