Green innovations for sustainable development of China: Analysis based on the nested spatial panel models

Improving green innovation efficiency (GIE) is crucial for attaining sustainability in China's stage of high-quality development. However, there is a paucity of research on the roles of and links among the government and market in GIE. This study bridges this research gap by unifying marketization, local government competition, and GIE into one empirical framework. First, we extend a super-efficiency Ray slacks-based measure model to evaluate provincial GIE in China during 1997–2018 and then analyze its evolution of spatial-temporal dynamics. Subsequently, marketization, local government competition, and GIE are incorporated into a nest of spatial panel models to address the endogeneity concerns resulting from model misspecification and omitted variables. The empirical results show that China's GIE at the national level is only 0.4813, and above 80% of provinces are far from reaching the green innovation frontier. Moreover, the observed imbalance in GIE between regions continues to worsen; notably, this coincides with the emergence of a pattern under which the gap between the north and south is widening. Furthermore, the seven spatial panel models assessed in this study reveal that local government competition not only has a direct inhibitory effect on GIE, but also indirectly impedes the corresponding promotional effect of marketization. This finding provides new evidence supporting the “grabbing hand of government” view and sheds light on the behaviors of the market and government in green innovation development.