The Green Innovation Effect of Environmental Regulation: A Quasi–Natural Experiment from China

The “Two Control Zones” (TCZ) policy is the first air pollution regulation policy in China. We aim to examine the impact of the TCZ policy on green technological progress applying a difference–in–differences (DID) approach, using a city–level panel data set from 1990 to 2016. We show that the TCZ policy effectively increases the number of green patents of the cities in the two control zones. In particular, the TCZ policy has a significantly positive effect on the quantity and structure of human capital, including the number of inventors of patents and green patents, and the percentage of population with a higher education level. Moreover, the effects are heterogeneous, that is, the TCZ policy has a greater impact on the number of green patents in the control zones, where there are better R&D bases and more foreign investments.