The role of air pollution on innovation and entrepreneurship: A geographical regression discontinuity design

This paper employs regression discontinuity design (RDD) to scrutinize the influence of air pollution on innovation and entrepreneurship and further explores the underlying mechanisms. The findings indicate that: First, air pollution reduces urban innovation and entrepreneurship. Specifically, a 1% increase in PM_2.5 concentration is associated with a decrease of 0.904% in the innovation and entrepreneurship index. Second, all entrepreneurship indicators and innovation metrics are susceptible to air pollution. For innovation in particular, the negative impact on invention patents, a form of substantive innovation, is relatively small. Third, the study further identifies key mechanisms through which air pollution impedes innovation and entrepreneurship, including physical discomfort, weakened social networks, and reduced interpersonal trust. Fourth, sectoral analyses indicate that the negative impact is more pronounced in knowledge-intensive industries. This study highlights the importance of air-pollution control for sustainable economic development.