Does Reducing Air Pollution Make Inventors More Innovative? Evidence from the NOx Budget Program

Using the NOx budget trading program (NBP) as a quasi-natural experiment, we examine whether a reduction in air pollution enhances inventor risk-taking, thus making inventors more innovative. We find that inventors located in NBP participating states produce more patents after the introduction of the NBP. These patents also receive more forward citations and have higher economic value. The effect of the NBP is larger for less experienced inventors and inventors living in high-pollution areas. Further, inventors located in NBP participating states engage more in experimental innovation and less in specialization innovation after the NBP, which confirms the risk-taking channel.

Keywords: Air pollution; Inventor productivity; Innovation strategy

JEL Classification: G39, G40, O31

Suggested Citation: Suggested Citation

Luo, Yue and Chen, Yangyang and Lin, Ji-Chai, Does Reducing Air Pollution Make Inventors More Innovative? Evidence from the NOx Budget Program (March 2, 2020). Available at SSRN: https://ssrn.com/abstract=3547087 or http://dx.doi.org/10.2139/ssrn.3547087