The pain of breathing: how does haze pollution affect urban innovation?

In China, innovation plays an important role in achieving economic development with green growth, but innovation activities are inhibited by the spread of haze pollution (also called smog). Using panel data on 265 cities in China at the prefectural level from 2001 to 2018, this paper investigates the relationship between haze pollution and urban innovation. The conclusions are as follows. First, haze pollution has a significant inhibitory effect on urban innovation. After we consider endogeneity, eliminate extreme values, replace variables, and incorporate spatial correlation, we find that the negative impact of haze pollution on urban innovation still exists. Second, the channels through which haze pollution affects urban innovation are mainly attributed to production efficiency, willingness to consume, and entrepreneurial activity. Third, the inhibitory effect of haze pollution on innovation has a spatial spillover effect. Fourth, among the different regions in China, the most serious inhibitory effect of haze pollution on innovation is in the central region, while that of the eastern and western regions is insignificant. Moreover, across diverse Chinese cities, the significant inhibitory effects of haze pollution on innovation are mainly in cities that are abundant in natural resource. Accordingly, the efficient management of haze pollution is a critical prerequisite and effective guarantee for increasing urban innovation, such as promoting clean energy, strengthening technological innovation, and improving human capital.