Environmental regulation, industrial innovation and green development of Chinese manufacturing: Based on an extended CDM model

As for the academics and policymakers, more attention has been given to the issue on how to drive green development of the manufacturing through regulations and innovations. We construct the extended Crépon-Duguet-Mairesse (CDM) model and employ the panel data of Chinese manufacturing industries during 2003-2014 to examine the effects of environmental regulation on industrial innovation and green development. The findings reveal that (1) in the long term, environmental regulation has crowded out R&D investment. (2) Environmental regulation has inhibited patent outputs so that the “weak” version of Porter hypothesis is not underpinned. (3) In the short term, environmental regulation has promoted the improvements of labor productivity, energy efficiency and environmental efficiency in the manufacturing industry excluding green total factor productivity (GTFP), whereas in the long term, environmental regulation only has increased energy efficiency while it has obstructed labor productivity, which provides no support for the “strong” version of Porter hypothesis. (4) Different innovation outputs have distinct influences on labor productivity, energy efficiency, environmental efficiency and GTFP. Finally, this paper provides pertinent policy implications.