Resource regulation and green innovation: Evidence from China's water rights trading policy.

ABSTRACT

Green innovation is the pivotal part connected with achieving urban sustainable development. Resource regulation, represented by water rights trading policy (WRTP), is playing an increasingly important role in supporting urban green innovation (UGI). Therefore, this paper uses the WRTP conducted in 2014 in China as a quasi-natural experiment to evaluate the net effect of resource regulation on green innovation by the identification methods of difference-in-differences (DID) model. The results show that (1) WRTP promotes UGI significantly, and this finding holds after a series of robustness tests. (2)The influencing mechanisms are mainly by optimizing industrial structure and enhancing the efficiency of resource allocation and information exchange efficiency and the promoting function is moderated by urban competitiveness and population agglomeration. (3) The promotion effects are greater in cities with higher level of government intervention, environmental pollution, water using quantity and local economy.(4) WRTP has the spatial spillover effect on UGI. These findings provide insights into sustainable development of water resources, management of water trading market, urban green innovation and sustainable economic development.