The diminishing marginal contribution of R&D investment on green technological progress: a case study of China's manufacturing industry.

ABSTRACT

One of the ways to fight against global warming is by means of green technological progress. This paper explores the nonlinear relationship between R&D investment and green technological progress based on panel threshold regression model using panel data of 26 manufacturing sub-sectors in China from 2004 to 2017. The results show that the double-threshold model can better explain the nonlinear relationship between the two, and the R&D investment in the three ranges of low, medium, and high levels can significantly promote green technological progress in China's manufacturing industry. However, with the improvement of R&D investment level, the promotion effect of R&D investment on the progress of manufacturing green technology is decreasing, which explains the low R&D intensity of China's manufacturing industry to a certain extent. When the level of R&D investment reaches a certain level, its promoting effect on manufacturing industry's green technological progress will be greatly reduced, and the motivation of enterprises to invest in R&D based on self-interest will decrease, so that the scale of R&D investment will be lower than the optimal scale of society. R&D investment can also improve green technical efficiency change. In addition, environmental regulation can promote green technological progress in manufacturing industry. However, due to the implementation of output-oriented environmental regulation policies, China's environmental regulation can inhibit the improvement of green technical efficiency change. Based on the conclusion, this paper argues that China should implement differentiated R&D subsidy policies for manufacturing enterprises, especially to increase R&D subsidies for enterprises with a medium level of R&D investment, and formulate appropriate environmental regulatory policies, to promote green and low-carbon transformation of China's manufacturing sector.