Innovative City Policy and Water Pollution: Evidence from a Quasi-natural Experiment in China

This study evaluates the impact of China’s innovative city pilot policy on urban water pollution. Based on panel data of 278 cities in China from 2005 to 2018, we employ the difference-in-differences method and find that the policy can significantly reduce water pollution in pilot cities. The lags exist in the effect of innovative city pilot policy, but the effect remains significant in the long term. Heterogeneity analysis shows that the effect is more pronounced for cities in eastern and central regions of China, and the policy is particularly effective among cities at prefecture level. An examination of the underlying mechanisms shows that promotion in urban technological innovation, human capital accumulation and the advancement of industrial structure associated with the innovative city pilot policy may play a role. Our findings indicate that establishing an innovation-driven development model through policy support and enhancing urban innovation level are beneficial to reducing water pollution and achieving green development. JEL: C33; Q55; R58