Can the Circular Economy Demonstration Policy Enhance the Green Innovation Level? A Quasi-Natural Experiment from China

Abstract

Although both circular economy and green innovation (GI) have received increasing research attention, little is known about their relationship. Based on quasi-natural experimental analysis, this study explored the impact and mechanism of the National Circular Economy Demonstration City (NCEDC) policy on GI in China and adopted a difference-in-difference (DID) model using the data of 265 cities in China from 2004 to 2018. The results show that the NCEDC policy has significantly improved the cities’ GI level, which can be achieved through industrial structure upgrading and innovation R&D investment effect, and has a stronger performance in eastern cities and lower administrative level cities. Our findings not only present novel evidence on the relationship between the circular economy and GI, but also offer valuable insights for advancing policy pilot initiatives in the field of environmental management.