Spillover effect of environmental investment: evidence from panel data at provincial level in China

This paper considers pollution density as a function of environmental investment. The higher environmental investment, the lower pollution density. The lower the pollution density is the higher production technology becomes. This is called the spillover effect. We collected China's panel data at the provincial level from 2005 to 2009, and tested the spillover effect of environmental investment. This paper finds that the environmental investment influenced production technology positively. There is a significant positive relation between government expenditure and spillover effect.