The Effect of Trade Policy Uncertainty on Green Technology Innovation: Evidence from China’s Enterprises

Xiaoling Zhao, Mingru Peng (), Xing Wang (), Rui Xu and Yongze Cui
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Xiaoling Zhao: School of Economics, Jinan University, Guangzhou 510632, China
Mingru Peng: Law School, Guangxi University, Nanning 530004, China
Xing Wang: School of Economics and Management, Yunnan Normal University, Kunming 650500, China
Rui Xu: Global Development Institute, University of Manchester, Manchester M13 9PL, UK
Yongze Cui: School of Economics and Management, Shanxi Normal University, Taiyuan 030031, China

Sustainability, 2024, vol. 16, issue 16, 1-23

Abstract: Promoting green technology innovation is essential for sustainable development and the transition to a low-carbon economy. Using data from listed manufacturing companies in China from 2000 to 2020, this paper takes the establishment of permanent normal trade relations with the United States after China’s accession to the WTO as a quasi-natural experiment and uses the difference-in-differences method to study the impact of the decline in trade policy uncertainty on firms’ green technology innovation. The results show the following: (1) Reduced trade policy uncertainty significantly enhances green technology innovation in firms. (2) Further research finds that the decline in trade policy uncertainty mainly promotes the level of the green technology innovation of firms by alleviating financing constraints faced by firms and intensifying market competition. (3) A heterogeneity analysis reveals that the impact is more pronounced in firms with lower capital intensity, higher growth, export firms, and firms exporting to the United States. This study offers micro-level empirical evidence from China on the economic outcomes of external trade policy changes from the perspective of firms’ green technology innovation and provides insights into how the government should respond to the risks of external trade frictions and improve firms’ sustainable development in the future.

Keywords: trade policy uncertainty; green technology innovation; difference-in-differences method (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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