Does green innovation induce green total factor productivity? Novel findings from Chinese city level data

Improving green total factor productivity (GTFP) is an important way to promote high-quality economic development. The “innovation dividend” based on green innovation is the key to enhancing green TFP. In this study, the effect of green innovation on GTFP in cities was empirically investigated. The results show that: (1) after including year and city-fixed effects and clustering over time and individuals, green innovation has a significant positive effect on GTFP. Financial development, population density, and environmental regulation correlate significantly negatively with GTFP, whereas urbanization promotes GTFP; (2) the effect of green innovation is more pronounced in the eastern region. The effect of green innovation on GTFP is more significant in non-resource-based cities or cities with higher levels of economic development or more government intervention; (3) the effect of green innovation on GTFP may be affected by the upgrading of industrial structure and innovation factor agglomeration. Cities where GTFP increases first have a first-mover advantage. After adding spatial factors to the model, a notable “positive spillover effect” of GTFP improvement can be observed in neighboring cities.