Abstract Based on China’s provincial panel data from 2005 to 2015, Cobb-Douglas production function is used to calculate the degree of factor price distortion. This paper measures the innovation capability from the three dimensions of innovation input, innovation output and innovation environment. Then the dynamic GMM method and intermediary effect model are used to study the influencing mechanism of factor price distortion on environmental pollution and regional innovation capability. The major conclusions are that both capital factor and labor factor price distortion aggravate environmental pollution and hinder improvements in environmental quality. The enhancement of regional innovation capability can significantly reduce pollutant emissions. Factor price distortions inhibit the improvement of innovation capability and under the restraint of factor price distortion, the role of regional innovation capability on environmental protection is weakened. Thus, factor price distortion has a double negative impact on the environment. In view of regional differences, further analysis shows that factor price distortions in high economic regions have a greater impact on environmental pollution than in low economic regions in addition to a stronger effect on regional innovation capability.
2019, Vol. 36 
