Title: The Rule of Law Driving Innovation: Evidence from China
Speaker: Jianwen Li, School of Economics, Shandong University
Abstract: This study investigates the impact of the rule of law on innovation, with a particular focus on the improvements made across Chinese cities. Using natural language processing techniques, we construct a city-level rule of law index and find that a stronger rule of law framework significantly enhances both radical and incremental innovation. Our analysis reveals key mechanisms through which the rule of law fosters innovation, including better intellectual property protection, talent attraction, financial development, government investment in innovation, and infrastructure improvement. Heterogeneity analyses further show that the positive effects of rule of law improvements are most pronounced in non-traditional industrial cities, cities with high market potential, peripheral cities, and those within national urban clusters. Additionally, spatial spillover effects indicate that improvements in the rule of law not only stimulate innovation within a city but also positively impact neighboring cities. Industry-level analysis highlights that rule of law improvement increases the location quotient of high-innovation industries, while firm-level data shows that a stronger legal framework encourages greater investment in innovation and output. This research underscores the significant role of the rule of law in driving innovation at both the macro and micro levels.
Zoom Meeting: https://anu.zoom.us/j/89594951640?pwd=HoGQm55IzBdepfFMG7pImFKKLCPwLX.1
Meeting ID: 895 9495 1640, Password: 233953