Effective Government and Regional Technological Innovation: Evidence From 284 Cities in China

ABSTRACT Based on the exogenous shock of incorporating environmental performance into local officials' evaluations, this paper manually collects and collates publicly available data on environmental target constraints (constraints on government environmental indicators for the coming period) from city government work reports as well as panel data from 284 cities in China from 2003 to 2018, and adopts the DID model to explore the impact of local government environmental target constraints on technological innovation after the implementation of the environmental target responsibility system. Our analysis reveals the following key aspects. First, local government environmental target constraints can significantly enhance the quantity of technological innovation, and the conclusion is robust and reliable. Second, the mechanism test shows that local government environmental target constraints can significantly increase the probability of local governments setting soft constraints on economic growth targets, increasing local investment in science and education, and improving the intensity of environmental regulation to promote regional technological innovation. Third, local government environmental target constraints can more effectively promote technological innovation in cities with low fiscal pressure, weak local government competition, and higher level of economic development. Further analysis finds that the autonomous constraint on the environmental target of local government can promote effectively green substantive innovation. This research highlights the crucial role of environmental policy in influencing sustainable technological progress by demonstrating how local government environmental target constraints can act as a stimulus for technological innovation, especially green innovation.