Can Environmental Regulation Promote Green Innovation and Productivity? The Moderating Role of Government Interventions in Urban China

Yuanshuo Xu, Jiahe Liang (), Zhaoyingzi Dong () and Minjun Shi
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Yuanshuo Xu: School of Public Affairs, Zhejiang University, Hangzhou 310058, China
Jiahe Liang: School of Public Affairs, Zhejiang University, Hangzhou 310058, China
Zhaoyingzi Dong: School of Public Affairs, Zhejiang University, Hangzhou 310058, China
Minjun Shi: School of Public Affairs, Zhejiang University, Hangzhou 310058, China

IJERPH, 2022, vol. 19, issue 21, 1-17

Abstract: Can environmental regulation promote green innovation and the productivity of cities? The “Compliance Cost” (CC) perspective and the “Porter Hypothesis” (PH) offer contrasting views, whereas the existing empirical results are inconclusive. This paper aims to highlight the roles of multifaceted government interventions, including government-to-firm subsidies, tax levies on firms, and environmental infrastructure provisions, in moderating environmental regulation for realizing PH. Based on the fixed-effects models for Chinese prefecture cities from 2005–2013, we found that environmental regulation positively impacted green innovation but negatively affected productivity. The results of moderating effects suggest that environmental regulation can better promote green innovation if it is compounded with more government-to-firm subsidies, lower firm tax burdens, and increased environmental infrastructure provisions. We further decomposed the impacts of these interventions across seven fields of green innovation and found that subsidy and tax burden relief were especially effective in facilitating more GI in the sector of transportation and alternative energy production. This paper amplifies the theoretical framework of PH by accentuating the analytical lens of multifaceted government interventions but also provides insights into how local governments can effectively design “carrot-and-stick” policies to realize PH at the city level.

Keywords: porter hypothesis; green innovation; productivity; environmental regulation; local government interventions; environmental policy mixes (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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