Environmental decentralization and innovation in China

This paper investigates the spatial effect of environmental decentralization on innovation using the spatial Durbin model from 2006 to 2015 in China. The results not only confirm the local effect of environmental decentralization on innovation, but also exists the spatial effect after introducing the spatial weighed matrix. We also note that different types of environmental decentralization have different effects on innovation. The impact of the environmental decentralization of governance on innovation is stronger than that on finance in the local effect, while the spatial impact is opposite to the local effect. The policy implication is that the government should apply a special type of environmental decentralization to increase innovation. Enhancing environmental decentralization of finance for local and neighbor innovation and decreasing the environmental decentralization of governance are better for increasing innovation.