Conference Agenda

We study a novel channel of policy-induced innovation operating through global environmental interdependence. In 2018, China abruptly banned most imports of foreign waste, disrupting global material flows and forcing exporting countries to internalize disposal constraints. Exploiting this policy as an exogenous shock and leveraging cross-country variation in pre-ban exposure, we examine how tightening disposal constraints affect plastics-related innovation in Europe. Using patent data for EU member states and Great Britain from 2009 to 2021, we develop a text-based approach to identify environmentally oriented plastics innovations that standard classifications poorly capture. We find that the shock reallocated inventive effort economy-wide toward plastics-related eco-innovations. Within that category, patenting activity shifted away from the adoption of foreign technologies and toward new domestic inventions, reflecting the increased need for locally adapted solutions, with stronger responses where waste pressures became more binding. This evidence highlights how constraints imposed abroad can reshape not only the level but also the origin and direction of domestic technological change, with implications for countries' positions in the global technology race.