Wan, Kai
A icle
Local go e nmen s compe ing o he en i onmen and
g een inno a ion-e idence om China
Jou nal o Applied Economics
P o ided in Coope a ion wi h:
Uni e si y o CEMA, Buenos Ai es
Sugges ed Ci a ion: Wan, Kai (2024) : Local go e nmen s compe ing o he en i onmen and g een
inno a ion-e idence om China, Jou nal o Applied Economics, ISSN 1667-6726, Taylo & F ancis,
Abingdon, Vol. 27, Iss. 1, pp. 1-20,
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Local go e nmen s compe ing o he en i onmen and
g een inno a ion-e idence om China
Kai Wan
To ci e his a icle: Kai Wan (2024) Local go e nmen s compe ing o he en i onmen and
g een inno a ion-e idence om China, Jou nal o Applied Economics, 27:1, 2358723, DOI:
10.1080/15140326.2024.2358723
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RESEARCH ARTICLE
Local go e nmen s compe ing o he en i onmen and
g een inno a ion-e idence om China
Kai Wan
School o Economics, Hangzhou Dianzi Uni e si y, HangZhou, China
ABSTRACT
Enhancing g een inno a ion is he key o ealizing high-quali y
de elopmen and he “dual-ca bon” goal. This pape akes he
da a om Chinese ci ies om 2000 o 2018 as a sample o es
he impac and mechanism o local go e nmen s’ compe i ion o
he en i onmen on u ban g een inno a ion. The s udy ound ha
local go e nmen compe i ion o he en i onmen can e ec i ely
p omo e u ban g een inno a ion, and he spa ial spillo e e ec is
signi ican and can lead neighbo ing ci ies o imp o e he le el o
g een inno a ion join ly. The esul s o he mechanism es indica e
ha local go e nmen compe i ion p omo es g een inno a ion
h ough wo channels: in luencing iscal expendi u e bias and he
es ablishmen o de elopmen zones. Fu he analysis shows ha
he impac o go e nmen compe i ion on g een inno a ion has
appa en spa ial he e ogenei y, while he double- h eshold e ec
esul s in an “N”-shaped ela ionship be ween local go e nmen
compe i ion and u ban g een inno a ion.
ARTICLE HISTORY
Recei ed 8 Sep embe 2023
Accep ed 16 May 2024
KEYWORDS
En i onmen al
decen aliza ion; iscal
spending bias; de elopmen
zone c ea ion; heo e ical
models
1. In oduc ion
China’s economy has led he global economic eco e y a e he 2008 global inancial
c isis, and as o 2023, China’s manu ac u ing alue-added anked i s in he wo ld
o 13 consecu i e yea s (Lo Re e al., 2023). Howe e , he ene gy-in ensi e ising
pa e n o poo e iciency has b ough se e al issues, including esou ce deple ion and
en i onmen al de e io a ion (Alde e al., 2016). The eason o his is ha local
go e nmen s ha e p io i ized economic g ow h as hei p ima y goal e e since he
iscal decen aliza ion sys em was implemen ed in 1994, esul ing in a model o
compe i ion whe e “GDP” is he keys one, which has he e o e caused an “emphasis
on g ow h a he expense o he en i onmen .” The “g ow h o e en i onmen ”
phenomenon has esul ed om his. The epo o he Twen ie h Pa y Cong ess
p oposes accele a ing he g een ans o ma ion o he mode o de elopmen , p omo -
ing he g eening and deca boniza ion o economic and social de elopmen , and
accele a ing he esea ch and de elopmen and popula iza ion and applica ion o
ad anced ene gy-sa ing and ca bon- educing echnologies. As a usion o “g een
de elopmen ” and “inno a ion d i e”, g een echnological inno a ion is he co e
CONTACT Kai Wan [email p o ec ed] School o Economics, Hangzhou Dianzi Uni e si y, HangZhou, China
JOURNAL OF APPLIED ECONOMICS
2024, VOL. 27, NO. 1, 2358723
h ps://doi.o g/10.1080/15140326.2024.2358723
© 2024 The Au ho (s). Published by In o ma UK Limi ed, ading as Taylo & F ancis G oup.
This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons A ibu ion-NonComme cial License (h p://
c ea i ecommons.o g/licenses/by-nc/4.0/), which pe mi s un es ic ed non-comme cial use, dis ibu ion, and ep oduc ion in any medium,
p o ided he o iginal wo k is p ope ly ci ed. The e ms on which his a icle has been published allow he pos ing o he Accep ed
Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
d i ing o ce and a key link in balancing ecological esou ces and he en i onmen ,
con ibu ing o he ealiza ion o he “dual-ca bon” goal and p omo ing sus ainable
economic de elopmen (Mele & Magazzino, 2020; Udeagha & B ei enbach, 2021).
Unde he double cons ain s o “ene gy sa ing and emission educ ion” and “dual
ca bon” a ge s, he pe o mance e alua ion index sys em o Chinese local go e n-
men o icials has also been adjus ed om he adi ional “GDP” as he ba on o he
compe i ion mode g adually il ed in he di ec ion o he en i onmen . So how does i
a ec u ban g een inno a ion in a con ex whe e local go e nmen s compe e o he
en i onmen ? And h ough wha mechanisms? This se ies o ques ions is signi ican
o China’s e o s o each he “dual ca bon” a ge , s imula e g een echnology
inno a ion, and ealize he win-win ecological and economic bene i s si ua ion.
G een echnological inno a ion has been one o he impo an opics discussed in
he economics li e a u e in he las wo decades. Es ablished s udies ha e explo ed he
c i ical ac o s a ec ing g een echnological inno a ion, mainly ega ding FDI, indus-
ial agglome a ion, inancial de elopmen , and he digi al economy (Li e al., 2023;
Magazzino, 2023). Rega ding he s udy o he ela ionship be ween local go e nmen
compe i ion and he en i onmen , he es ablished s udies ocus on he ollowing h ee
a eas o discussion: The i s b anch o li e a u e analyzes he impac o iscal
decen aliza ion and en i onmen al egula ion on g een echnological inno a ion
om wo dimensions, a guing ha decen aliza ion b ough abou by iscal decen-
aliza ion as well as in e -go e nmen al compe i i e beha io s will lead o sho -
sigh ed beha io s o local go e nmen s owa ds he ecological en i onmen . Fo
example, DiLiddo e al. (2018) a gue ha compe i ion among local go e nmen s in
pu sui o economic g ow h has a signi ican ace- o- he-bo om e ec on en i on-
men al pollu ion and ha his e ec will wo sen as he le el o iscal decen aliza ion
inc eases (Kunce & Shog en, 2008). Böche (2012) measu es eco-e iciency using
Chinese p o incial-le el panel da a om 1998–2013 and inds ha iscal decen aliza-
ion leads o a decline in eco-e iciency wi h signi ican spa ial spillo e s in he
eas e n and wes e n egions. Konisky (2007) simila ly poin s ou ha local go e n-
men s end o compe e a he bo om o he ba el ega ding en i onmen al egula-
ion, which could be mo e conduci e o en i onmen al imp o emen . The second
s and o he li e a u e explo es he co e condi ions a ec ing egional g een inno a-
ion and he mechanisms o hei in e ac ion. I a gues ha go e nmen compe i ion
can help play he “helping hand” ole and signi ican ly p omo e g een inno a ion. Nie
e al. (2022) poin ed ou ha local go e nmen s can enhance g een inno a ion by
o mula ing co esponding en i onmen al egula ion policies o es ain en e p ises.
The g ea e he in ensi y o en i onmen al egula ion, he mo e i can o ce en e -
p ises o imp o e hei g een inno a ion echnology, hus ealizing a win-win si ua-
ion o economic de elopmen and en i onmen al p o ec ion. F ondel’s e al. (2007)
s udy also suppo s he idea ha local go e nmen s can posi i ely in luence i ms’
g een echnological inno a ions by s eng hening en i onmen al egula ions. Li le
li e a u e has explo ed he impac s and mechanisms o g een inno a ion om he
pe spec i e o local go e nmen s compe ing o he “en i onmen ”. The hi d s and
o li e a u e sugges s ha ac o s such as ma ke compe i ion, le el o economic
de elopmen , and indus ial s uc u e may shape he ela ionship be ween local
go e nmen compe i ion and g een inno a ion (Jiang e al., 2023; Magazzino e al.,
2K. WAN
2022) and ha local go e nmen beha io ha does no ma ch he ac o endowmen
o he ci y in which i is loca ed may ha e an inde e mina e e ec on g een inno a-
ion, which in u n leads o a go e nmen compe i ion o he en i onmen has
a nonlinea ela ionship wi h g een echnology inno a ion e iciency (Xu e al., 2022).
I is easy o ind ha he exis ing li e a u e on local go e nmen compe i ion and g een
echnological inno a ion has conduc ed a p elimina y discussion. Howe e , he e a e s ill
ce ain a eas o imp o emen . Fi s , he exis ing esea ch is mainly conce ned wi h he
local go e nmen because he g ow h o compe i ion has led o changes in en i onmen al
egula o y beha io , hus impac ing he ecological en i onmen and g een inno a ion.
Howe e , as China g adually en e s he s age o high-quali y de elopmen , and he
assessmen sys em o local go e nmen s is g adually changing om “GDP” o equal
emphasis on economy and en i onmen , he exis ing s udies a e insu icien o discuss
he changes in en i onmen al egula o y beha io s o local go e nmen s o he sake o
en i onmen al compe i ion, as well as he cascading e ec s o g een inno a ion in ci ies.
Second, he esea ch pe spec i e is single; he exis ing li e a u e is mainly om he
pe spec i e o in o ma ion asymme y, ocusing on he e ical in e -go e nmen al
ela ions be ween he cen al and local go e nmen s, and he discussion on he ho izon al
in e ac ion be ween go e nmen s needs o be mo e p o ound. I is necessa y o analyze
he s a egic choices caused by he ho izon al in e ac ion o go e nmen s based on
e ical in e -go e nmen al ela ions. Thi dly, he esea ch objec needs o be mo e
comp ehensi e, and he exis ing esea ch a o s he p o incial le el and pays less
a en ion o he ci y le el. In con as , analyzing g een echnological inno a ion om
he ci y le el has mo e accu a e decision-making alue.
Gi en his, his pape uses da a om 285 p e ec u e-le el ci ies in China om 2000 o
2018 o es he ela ionship be ween local go e nmen s’ compe i ion o he en i onmen
and u ban g een inno a ion. They a e conside ing ha unde he adi ional GDP app aisal
sys em, local go e nmen s o en ocus on in as uc u e in es men o win he app aisal
ad an age, and unde in es in people’s li elihoods, which is no conduci e o he enhance-
men o he le el o g een inno a ion (Zhang & Zou, 1998). Whe e local go e nmen s
compe e o he “en i onmen ”, local iscal spending p e e ences change, a ec ing g een
inno a ion (Udeagha & Ngepah, 2023). A he same ime, he es ablishmen o de elop-
men zones, as one o he essen ial means o local go e nmen s o p omo e in es men
a ac ion and indus ial agglome a ion, may be a ec ed by changes in he app aisal sys em
o go e nmen o icials in cha ge, a ec ing g een inno a ion in ci ies.
The ma ginal con ibu ions o his pape a e as ollows: Fi s , his pape examines he
o ms o local go e nmen s’ compe i ion o he “en i onmen ”, which is mo e con-
duci e o he po ayal o local go e nmen s’ s a egic beha io s in he con ex o he
cons uc ion o a beau i ul China, and p o ides new explana ions o he ela ionship
be ween local go e nmen s and g een inno a ion. Second, his pape illus a es he
impac o local go e nmen s’ compe i ion o he “en i onmen ” on g een inno a ion
by cons uc ing a ma hema ical model and analyzing i s mechanism om he dimensions
o iscal expendi u e bias and he es ablishmen o de elopmen zones, which makes up
o he sho comings o he exis ing li e a u e, which is mainly illus a ed h ough logical
easoning. Finally, his pape ma ches he da a om he S a e In ellec ual P ope y O ice
(SIPO) wi h he G een Pa en Classi ica ion Numbe (GPCN) s anda d published by he
Wo ld In ellec ual P ope y O ice (WIPO) o ob ain he ci y’s g een pa en da a, which
JOURNAL OF APPLIED ECONOMICS 3
in u n se es as a measu e o g een inno a ion, no only a oiding he e o s a ising om
he p e ious eliance on he measu emen o g een inno a ion bu also p o iding
empi ical e idence a he ci y le el.
2. Theo e ical ounda ions and assump ions
This sec ion d aws on Acemoglu e al. (2012) en i onmen al echnological p og ess o
ma hema ically deduce he e ec o local go e nmen compe i ion o he en i onmen
on he e iciency o g een inno a ion. Assuming local ep esen a i e en e p ises i, in he
con ex o China’s pa icula socialis si ua ion, he objec i es o en e p ises a e no only
o maximize hei p o i s, bu also o ake in o accoun he ela ionship be ween go e n-
men and en e p ises, and he ac ions o local go e nmen s o en in luence en e p ises’
decisions. Unde he in luence o he local go e nmen , his pape conside s ha he
i m’s objec i e balances p o i maximiza ion and ou pu and se s he i m’s objec i e
unc ion as:
This pape d aws on Hsieh and Klenow’s (2009) app oach o se ing he ma ke as
a monopolis ically compe i i e s uc u e and assuming ha he ou pu o ep esen a i e
i ms sa is ies he Cobb-Douglas p oduc ion unc ion.
Whe e Yi is he ou pu o he ep esen a i e i m, Ki is capi al, Li is labo , and αþβ¼1,
he ep esen a i e i m, is cha ac e ized by cons an e u ns o scale. Fi ms p oduce
ex e nali ies in addi ion o hei p oduc s, in he ollowing unc ional o m.
θ Ai
ð Þ deno es he g een inno a ion capabili y o a ep esen a i e i m. The s onge he
g een inno a ion capabili y o an en e p ise, he lowe he ou pu o pollu ing goods.
Fi ms’ echnological inno a ion is posi i ely co ela ed wi h g een inno a ion, i.e., @θ Ai
ð Þ
@Ai
>0. Since he p oduc ion o p oduc s by ep esen a i e en e p ises leads o en i onmen al
pollu ion, local go e nmen s usually adop axa ion as a means o en i onmen al egula-
ion o en e p ises o mi iga e his nega i e ex e nali y, and we assume ha he en i on-
men al ax a e se by local go e nmen s is τ.
The p obabili y o R&D success o a i m is ela ed o local in as uc u e
(Acemoglu e al., 2016), which usually depends on he iscally biased spending o
he local go e nmen . The e o e, his pape assumes ha he p obabili y o a i m’s
R&D success is a unc ion o he local go e nmen ’s iscally biased spending, deno ed
as H(F), wi h @H Fð Þ
@F >0, ep esen ing ha he mo e he local go e nmen ’s iscally
biased spending, he g ea e he p obabili y o a i m’s R&D success. I he i m is
success ul in i s R&D, i can ha e a ma ke sha e o ψ. Assuming ha consume
spending is C, he go e nmen le ies a ax a e o . In his pape , he cos s o capi al
and labo used by a ep esen a i e i m a e deno ed by and w, espec i ely, he
p o i unc ion is as ollows.
4K. WAN
Assump ion 2, acco ding o he local go e nmen objec i e unc ion, his pape conside s
he case whe e he local go e nmen compe es o he en i onmen . Meanwhile, local
go e nmen s will also pu sue local e enue N. Gi en his, he objec i e unc ion o local
go e nmen s is se as ollows.
Whe e N= ψCH Fð Þ+τGYi
ð Þ, δdeno es he p e e ences o local go e nmen s be ween
ou pu and en i onmen al pollu ion.
By cons uc ing a wo-s age game be ween en e p ises and local go e nmen s, i is
conside ed ha local go e nmen s ha e a i s -mo e ad an age in playing he game wi h
ep esen a i e en e p ises, choosing iscal bias and he in ensi y o en i onmen al eg-
ula ion o maximize hei u ili y. The ep esen a i e en e p ises conside he local
go e nmen ’s choice in hei decision-making. The e o e, his pape adop s he in e se
solu ion me hod and conside s he choice o ep esen a i e en e p ises i s .
Subs i u ing equa ion (4) in o equa ion (1), we ob ain.
Cons uc ing he Lag angian unc ion such ha equa ion (7) inds he i s -o de pa ial
de i a i es o Ki and Li, espec i ely, gi es
Combining equa ions (8) and (9) wi h he cons ain ha he ep esen a i e i m’s p o i
is posi i e, we ob ain exp essions o Ki and Li due o αþβ¼1.
Subs i u ing equa ions (10) and (11) in o (2) yields.
Fu he , by subs i u ing equa ion (12) in o (3), he g een inno a ion e iciency o he i m
is ob ained as.
JOURNAL OF APPLIED ECONOMICS 5
Subs i u ing (12) in o he local go e nmen ’s objec i e unc ions (5) and (6) espec i ely
gi es.
Le V2 be pa ial de i a i e wi h espec o θ Ai
ð Þ, F and τ espec i ely.
Based on equa ion (15), we o mula e Hypo hesis 1.
H1: Local go e nmen compe i ion o he en i onmen can signi ican ly p omo e he
le el o g een inno a ion.
Fu he le V1 be pa ial de i a i e wi h espec o F Since @H Fð Þ
@F >0 we ge : he e ind V
2
.
Local go e nmen compe i ion plays a i al ole in a ac ing esou ces by se ing up
de elopmen zones o a ac in es men , and he apid g ow h o de elopmen zones has
been achie ed due o compe i ion be ween local go e nmen s. Acco ding o he 2018
China De elopmen Zone Audi and Announcemen Ca alog, as o he end o 2018, he e
we e a o al o 1991 p o incial-le el de elopmen zones. Based on he 294 p e ec u e-
le el ci ies na ionwide, he a e age numbe o de elopmen zones pe p e ec u e-le el
ci y amoun s o 6.7 p o incial-le el de elopmen zones, which a e agglome a ion-d i en
and p o ide he app op ia e pla o m o i ms o p omo e inno a ion in es men ,
6K. WAN
he eby enhancing he e iciency o g een inno a ion in ci ies and achie ing high-quali y
de elopmen . Local go e nmen s compe e h ough he zone channel and hus in luence
he e iciency o g een inno a ion. We p opose he ollowing hypo hesis based on he
conclusions o equa ions (16) and (17).
H2: Local go e nmen s compe e o he en i onmen by in luencing g een inno a ion
h ough iscal spending bias and he c ea ion o de elopmen zones.
3. Resea ch me hods
3.1. Da a
Due o he se e e lack o da a in a eas such as Tu pan and Linyi, hese ci ies we e
excluded, esul ing in a inal sample o 5,415 om 285 ci ies. The da a o u ban g een
pa en s we e ob ained om he classi ica ion s anda ds o SIPO and WIPO. The da a
sou ce o de elopmen zones is “Ca alog o China’s De elopmen Zones Audi and
Announcemen (2018 Edi ion)”, and o he da a is om “China U ban S a is ical
Yea book” o pas yea s. The s a is ical so wa e used in he empi ical pa o his
pape is S a a 15, and he so wa e used in he map pa is A cMap 10.1. Missing alues
a e illed in by in e pola ion.
3.2. Model
To conside he impac o local go e nmen compe i ion on u ban g een inno a ion, his
pape d aws on C. Y. Liu e al. (2022). I in oduces he in e ac ion e m be ween local
go e nmen compe i ion and en i onmen al egula ion as he co e explana o y a iable
and he le el o u ban g een inno a ion as he explana o y a iable. The model as shown
in equa ion (18) is cons uc ed:
Whe e INNi is he le el o g een inno a ion in he ci y i in yea . lCompi * IERi is he
co e explana o y a iable. Xi deno es he con ol a iable and α0is he in e cep e m.
Coe icien α1is he local go e nmen compe i ion eg ession coe icien , α is he con ol
a iable eg ession coe icien ,υiis he ci y ixed e ec , εi is he ime ixed e ec .
To es o spa ial spillo e e ec s, his pape cons uc s a spa ial Du bin model (19).
In his, a geog aphic dis ance weigh ma ix is cons uc ed o es o co ela ion and an
economic spa ial weigh ma ix o obus ness.
Fu he , we cons uc a h eshold panel da a model wi h Comp-ER as he h eshold
a iable o e i y he nonlinea ela ionship: as shown in equa ion (20).
JOURNAL OF APPLIED ECONOMICS 7
4.4. Channel inspec ion
The esul s o he model including iscal spending de ia ion a e shown in Table 7,
Model (1) and Model (2). Bo h he main eg ession coe icien and he spa ial
spillo e coe icien a e ound o be signi ican ly posi i e, indica ing ha he iscal
expendi u e de ia ion channel no only has a signi ican posi i e impac on
egional g een inno a ion, bu also has a signi ican spa ial spillo e o neighbo -
ing ci ies. Local go e nmen s compe e o imp o e g een inno a ion by expanding
iscal spending bias. Replacing he explana o y a iables eg ession esul s emain
consis en .
As can be seen om Table 8, he coe icien o he in e ac ion e m o local
go e nmen compe i ion o he en i onmen and de elopmen zones is signi ican ly
posi i e, and he coe icien o i s spa ial spillo e e ec is also signi ican ly posi i e
and we belie e ha local go e nmen compe i ion o he en i onmen h ough he
channel o de elopmen zones no only has an impac on local g een inno a ion,
bu also has a posi i e impac on he g een inno a ion in o he egions. The esul s
o eplacing he explana o y a iables wi h u ili y-based g een pa en s as in Table 3
ha e signi ican ly posi i e main e ec coe icien s and spa ial spillo e e ec coe i-
cien s, sugges ing ha he p ocess o in luencing he le el o g een inno a ion
h ough he channel o de elopmen zones as a esul o he compe i i e en i on-
men o he local go e nmen is s ong, and he compe i i e en i onmen o he
local go e nmen in luences he le el o g een inno a ion in he ci y h ough he
es ablishmen o de elopmen zones.
Table 7. Tes s o iscal spending bias in e ac ion e ec s.
Va iables INNA (1) INNB (2)
lComp*lER*lExpend 0.052***
(4.86)
0.036***
(4.01)
W*lComp*lER*lExpend 0.096***
(3.27)
0.062***
(2.58)
Con ol a iables YES YES
FE Time YES YES
FE Ci y YES YES
Obs 5415 5415
Adj-R20.783 0.821
Table 8. Tes s o de elopmen a ea in e ac ion
e ec s.
Va iables INNA INNB
lComp*lER*lZone 0.008***
(8.98)
0.005***
(7.15)
W*lComp*lER*lZone 0.009***
(4.12)
0.009***
(4.56)
Con ol a iables YES YES
FE Time YES YES
FE Ci y YES YES
Obs 5415 5415
Adj-R20.791 0.820
14 K. WAN
5. Fu he analysis
To examine he he e ogenei y o de elopmen zone es ablishmen mechanisms ac oss
di e en egions, he sample is u he analyzed acco ding o h ee sub-samples o
eas e n, cen al, and wes e n ci ies. The eg ession esul s a e shown in Table 9. The
de elopmen zones in e ac ed wi h he egional ci y dummy a iable. F om he empi ical
es s, i is concluded ha he de elopmen zone channel in he eas e n ci ies signi ican ly
inc eases he le el o u ban g een inno a ion compa ed o he ci ies in he cen al and
wes e n egions. Fu he g ouping he iscal expendi u e bias by eas e n, cen al, and
wes e n China, he esul s show ha eas e n ci ies ha e a signi ican ly highe le el o
g een inno a ion in he iscal expendi u e bias channel compa ed o cen al and wes e n
ci ies (Liu e al., 2021). Ou s udy is consis en wi h he indings o Wang e al. (2022).
Realizing di e en en i onmen al egula ion in ensi ies o di e en egions will be mo e
conduci e o he le el o g een inno a ion in ci ies due o he a iabili y o inancial and
de elopmen zones in di e en egions.
The model u he examines he mechanisms o en i onmen al egula ion in luencing
u ban g een inno a ion by conside ing local go e nmen compe i ion o he en i on-
men . The eg ession esul s a e shown in Table 10. The esul s o he h eshold es show
ha he single h eshold passes he signi icance es a he 1% le el when he in e ac ion
e m be ween local go e nmen compe i ion and en i onmen al egula ion is used as he
h eshold a iable and he explana o y a iable is g een pa en s o in en ions. The iple
h eshold did no pass he signi icance es . By eplacing he explana o y a iable g een
pa en s o in en ions wi h g een pa en s o u ili ies, he double h eshold s ill exis s.
Using he in e ac ion e m be ween local go e nmen compe i ion and en i onmen al
egula ion as he h eshold, he s udy shows ha he e ec o local go e nmen compe i-
ion o he en i onmen on u ban g een inno a ion is “N” shaped. Local go e nmen
Table 9. Tes s o he e ogenei y in de elopmen a eas.
Va iables
INNA INNB
Eas e n Cen e Wes e n Eas e n Cen e Wes e n
lComp*lER*lZone 0.007***(5.63) 0.001
(0.45)
0.006***(5.22) 0.003***
(2.99)
0.001
(1.30)
0.004***
(4.75)
W*lComp*lER*lZone 0.005
(1.50)
0.015***
(4.72)
−0.005*(-1.74) −0.003
(-0.97)
0.010***
(3.76)
0.006***(2.57)
Con ol a iables YES YES YES YES YES YES
FE Time YES YES YES YES YES YES
FE Ci y YES YES YES YES YES YES
Obs 0.759 0.781 0.668 0.700 0.820 0.813
Table 10. Th eshold model pa ame e es ima es.
Va iables
Th eshold
a iables Numbe o h esholds Th eshold
F-s a is ic
alues Signi icance
Con idence in e al
10% 5% 1%
In en ion
o g een
pa en s
lComp*lER Single h eshold 2213.416*** 54.38 0.000 19.251 21.243 28.603
Double Th eshold 2201.509** 29.18 0.060 24.173 31.549 51.293
Th ee- old h eshold 2193.222 20.39 0.203 26.660 36.563 45.719
P ac ical
g een
pa en s
lComp*lER Single h eshold 1645.267*** 33.54 0.007 16.646 20.489 26.349
Double Th eshold 1640.008* 17.30 0.077 16.215 18.144 23.701
Th ee- old h eshold 1635.945 13.40 0.343 21.943 26.275 35.888
JOURNAL OF APPLIED ECONOMICS 15
compe i ion o he en i onmen has a non-linea ela ionship wi h he le el o g een
inno a ion being p omo ed and hen supp essed, wi h o e ly s ingen en i onmen al
policies inc easing p oduc ion cos s and c owding ou g een inno a ion inpu s.
6. Discussion
Fi s , in con as o Yang e al. (2020) conclusion ha local go e nmen compe i ion in
China makes achie ing ene gy e iciency and emission educ ion di icul , his pape
inds ha a no el model o local go e nmen compe i ion a ound he en i onmen can
e ec i ely enhance u ban g een inno a ion. No only ha , his pape also h ough he
cons uc ion o he spa ial Du bin model ound ha he g een inno a ion e ec induced
by local go e nmen o en i onmen al compe i ion has an ob ious spa ial spillo e
e ec , and can e ec i ely d i e he neighbo ing ci ies o ake he oad o g een de elop-
men oge he , which is a use ul expansion o he esea ch o Y. Xu e al. (2023). Second,
gi en he dis inc Chinese cha ac e is ics o local go e nmen s’ ho izon al compe i ion
ools, his s udy u he e eals ha local go e nmen s’ iscal expendi u e bias and
de elopmen zone es ablishmen beha io a e impo an mechanisms h ough which
local go e nmen s compe e o he en i onmen leading o a signi ican inc ease in u ban
g een inno a ion. Thi d, unlike he indings o Chen e al. (2022), which discuss he
he e ogenei y o local go e nmen beha io only om he pe spec i e o empo al
pe sis ence, his pape i s explo es he di e en pe o mance cha ac e is ics o he
wo mechanisms o go e nmen iscal expendi u e bias and de elopmen zone es ablish-
men om he pe spec i e o geog aphic loca ion, which is a use ul addi ion o he
exis ing s udies. In addi ion, using he in e ac ion e m be ween local go e nmen
compe i ion and en i onmen al egula ion as a h eshold, his pape inds ha he e ec
o long- e m local go e nmen compe i ion o he en i onmen on u ban g een inno a-
ion is “N” shaped.
Fu u e esea ch can expand on his ounda ion. Fi s , his s udy used a la ge amoun o
da a o empi ical analysis a he ci y le el o explo e he ole o local go e nmen s
compe ing o he en i onmen and he logic behind i , bu i did no in oduce key cases
o speci ic analysis. Fu u e s udies can conduc in-dep h in es iga ions by ques ionnai e
su eys and in-dep h in e iews, a ge ing ep esen a i e go e nmen s and en e p ises, in
o de o p o ide mo e de ailed empi ical e idence o he impac o local go e nmen
compe i ion on g een inno a ion. Second, due o he limi a ions o da a and ela ed policies,
his pape does no deeply explo e he impac o he cha ac e is ics o p incipal go e nmen
o icials in explo ing he impac o local go e nmen compe i ion on g een inno a ion, and
u u e esea ch can u he analyze he he e ogeneous impac s o p incipal go e nmen
o icials’ enu e expe ience, gende cha ac e is ics, and so on, on g een inno a ion.
7. Conclusions and policy ecommenda ions
The adi ional mode o economic de elopmen has esul ed in inc easingly se e e
en i onmen al pollu ion, and he con adic ion be ween economic de elopmen and
he ecological en i onmen has become inc easingly p ominen . As he wo ld’s la ges
ca bon emi e , China has commi ed o he in e na ional communi y o achie e peak
ca bon emissions by 2030 and ca bon neu ali y by 2060. The go e nmen a aches
16 K. WAN
g ea impo ance o his, cons an ly imp o ing he ecological and en i onmen al
p o ec ion policy and adminis a i e agency managemen sys em, and p omo ing
g een inno a ion as an essen ial way o imp o e he ecological en i onmen and
achie e egional low-ca bon ans o ma ion. To explo e how en i onmen al decen-
aliza ion a ec s g een inno a ion unde en i onmen al egula ion, we conduc an
empi ical analysis o Chinese ci ies. We ind ha (1) local go e nmen s’ compe i ion
o he en i onmen has a signi ican posi i e e ec on g een inno a ion, and he e is
a signi ican spa ial spillo e e ec ha can d i e g een inno a ion in neighbo ing
ci ies. (2) The esul s o he mechanism es show ha local go e nmen s signi ican ly
p omo e u ban g een inno a ion by adjus ing iscal expendi u e bias and es ablishing
de elopmen zones o compe e o he en i onmen . (3) Fu he analysis e eals ha
geog aphic loca ion cha ac e is ics can signi ican ly in luence he e ec o local
go e nmen compe i ion and ha he mechanism o se ing up de elopmen zones
in which local go e nmen s compe e o he en i onmen impac s g een inno a ion,
which is mo e signi ican in he eas e n egion. In he long un, a signi ican
N-shaped ela ionship be ween local go e nmen compe i ion o he en i onmen
and u ban g een inno a ion. The esea ch in his pape helps o imp o e he le el o
u ban g een inno a ion and p o ides heo e ical e e ences o local go e nmen s o
o mula e policies. Based on he esul s o his s udy, we p opose he ollowing policy
ecommenda ions.
Fi s , he assessmen and incen i e sys em mus be imp o ed, and mul i-dimensional
a ge managemen mus be es ablished. The Chinese go e nmen should u he
enhance he p opo ion o en i onmen al ac o s in he assessmen sys em o local
go e nmen s, ind a balance be ween economic and en i onmen al assessmen indica-
o s, and es ablish pe ec incen i es and penal ies o e ec i ely b ing in o play he ole o
local go e nmen s in p omo ing u ban g een inno a ion o en i onmen al compe i ion.
Secondly, he design o he assessmen sys em o local go e nmen s o compe e o he
en i onmen should ully conside he di e ences in inancial expendi u e p e e ences
and he es ablishmen o u ban de elopmen zones. Based on summa izing he expe i-
ence o de eloped egions, i is p uden o p omo e he cons uc ion o a new ype o
in e -go e nmen al ela ionship o ho izon al “compe i ion”, hus o ming public in e -
es s among local go e nmen s and ealizing a c oss- egional coope a i e ne wo k o
en i onmen al pollu ion con ol and g een echnology inno a ion. Thi d, a ge p essu e
managemen is implemen ed acco ding o local condi ions. The esul s o his pape
show ha he eas e n egion pe o ms well, while local go e nmen s in he cen al and
wes e n egions do no ha e a signi ican ole in p omo ing u ban g een inno a ion
a ound en i onmen al compe i ion. The eas e n coas al a eas as he local go e nmen
pe o mance app aisal e o m on - unne , ully Kahui i s ad an ageous posi ion wi h
he ole o d i ing, o he wes e n, no heas e n and o he se ious dependence on
adi ional esou ces o he ci y, in he supe ision o he local go e nmen a ge
managemen a he same ime can be app op ia ely educed en i onmen al cons ain s,
inc ease policy suppo , “a ac ing capi al” and “a ac ing alen ” and gi e equal weigh
o. In addi ion, a his s age, China should con inue o guide local go e nmen s o shi
om “economic compe i ion” o “inno a ion compe i ion” and “g een compe i ion”, and
om “compe i ion” o “collabo a ion”, o e ec i ely p e en he diminishing ma ginal
e ec o local go e nmen compe i ion on u ban g een inno a ion.
JOURNAL OF APPLIED ECONOMICS 17
Acknowledgmen s
We a e e y g a e ul o he jou nal e iewe s o hei aluable commen s on he manusc ip .
Disclosu e s a emen
No po en ial con lic o in e es was epo ed by he au ho (s).
ORCID
Kai Wan h p://o cid.o g/0000-0002-5399-6468
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