Factor market distortion, technological innovation, and environmental pollution

Abstract

Factor market distortion is a critical factor that affects environmental pollution, and technological innovation is regarded as a new opportunity to alleviate environmental pollution. Based on panel data from 30 Chinese provinces from 2003 to 2019, this study constructs an intermediary effect model to test the influence mechanism of factor market distortion on regional environmental pollution and the intermediary effect of technological innovation, exploring these effects based on spatial differentiation characteristics. This study shows that factor market distortion protects industries with backward production capacity, high resource consumption, serious pollution, and low production efficiency from elimination; hinders the transformation and upgrading of the regional industrial structure; and forms a lock in the sloppy growth mode, which directly affects the improvement of regional environmental quality. This study reveals the influence of factor market distortions on environmental pollution. This provides empirical evidence for giving play to the decisive role of the market in resource allocation and promoting green technology innovation.