Modeling the Impact of Technological Innovation on Environmental Efficiency: A Spatial Panel Data Approach

Technological progress has widely been acknowledged as a key driver in the achievement of environmental sustainability, and a new concern has recently arisen for assessing the role of differences in regional innovation performances with respect to the pursuit of pollution targets. We investigate the impact of innovative activities on environmental efficiency at the regional level, adopting a spatial panel data approach to account for dependence between geographical observations and to get deeper insights into spatial knowledge spillovers arising from agglomeration economies. The spatial panel analysis covers 103 Italian provinces (equivalent to NUTS3 regions) on four major air pollutants (i.e., CO2, CH4, NMVOC, CO) over the 1995-2010 period. Our findings show that the state of local technology development, proxied by patents, has a positive impact on GDP emission efficiency and that its magnitude is higher for more localized pollutants as a result of larger spillover effects. Finally, to analyze the Italian North-South dualism of emission levels of pollutants, we offer a spillover effect study to emphasize the remarkable difference among effects in the territory. This calls for closer attention to the local relevance of the pollution damage when environmental impact of innovation strategies is to be evaluated.