Innovative City Construction and Urban Environmental Performance: Empirical Evidence from China

Environmental performance is a key issue that relates to the sustainable development of the economy and the environment. Innovation-driven approaches are fundamental in improving environmental performance; however, innovation activities come with uncertainties and require supportive policies from the government. This study utilizes the implementation of the Innovation City Pilot (ICP) policy in China as a quasi-natural experiment. It employs a progressive Difference-in-Differences (DID) model using panel data from 283 Chinese cities during the period of 2005-2019 to evaluate the impact of the ICP policy on Urban Environmental Performance (UEP) and its underlying mechanisms. The empirical results indicate that (1) the ICP policy significantly promotes the improvement of UEP and robustness analyses further support this conclusion; (2) compared to cities in the central and western regions, resource-dependent cities, and higher administrative level cities, the ICP policy is more beneficial for enhancing UEP in eastern, non-resource-dependent, and lower administrative level cities; (3) mechanism tests suggest that the ICP policy facilitates UEP improvement by leveraging technological innovation, upgrading industrial structure, and optimizing resource allocation; (4) the ICP policy not only benefits the UEP enhancement in local cities but also promotes UEP improvement in neighboring cities through spatial spillover effects. This study provides evidence and insights from China, contributing to the global implementation of innovation-driven development strategies for sustainable urban economic and environmental development.