Can air pollution reduce technology transfer? Evidence from China's prefecture-level cities

Area of Science:

• Environmental Economics
• Technological Innovation and Transfer
• Urban and Regional Economics

Background:

• Technological innovation is crucial for economic growth.
• Air pollution's detrimental effects on innovation are known, but its impact on technology transfer remains under-researched.
• Understanding technology transfer dynamics is vital for regional development and policy-making.

Purpose of the Study:

• To investigate the causal relationship between air pollution and technology transfer strength.
• To analyze the asymmetric effects of air pollution on technology transfer directions.
• To explore how GDP levels moderate the impact of air pollution on technology transfer.

Main Methods:

• Utilized thermal inversion as an instrumental variable to address endogeneity in air pollution.
• Employed the Panel Data with Fixed Coefficients (PLFC) model to analyze heterogeneity.
• Estimated marginal effects of air pollution on technology transfer across different GDP thresholds.

Main Results:

• A one-unit increase in air pollution was found to reduce technology transfer strength by 4.5%.
• Air pollution exhibits asymmetric effects, with highly polluted cities showing a greater tendency to transfer technology to other provinces.
• The marginal effect of air pollution on technology transfer is contingent on GDP levels, with effects stabilizing beyond a certain threshold (lngdp = 11).

Conclusions:

• Air pollution significantly impedes technology transfer, with implications for inter-regional economic disparities.
• Environmental regulations and GDP levels are critical factors influencing the direction and strength of technology transfer in polluted areas.
• Policy interventions should consider regional economic heterogeneity when addressing air pollution's impact on technological diffusion.