Water Governance and Water Innovation Adaptive Responses to Regulatory Change and Extreme Weather Events

During the past several decades, many countries have achieved significant progress on environmental issues such as water pollution through the increased stringency of their water policies. While a few studies have examined the stringency of overall environmental policy and its impacts on innovation, the direct link between water policies and water-related technological innovation has not yet been thoroughly investigated. This paper focuses on three aspects of water policy in the United States (drinking water quality, water pollution, and water quantity) and examines the effects of federal and state level regulatory changes on the level of relevant technological innovation. We construct a unique panel dataset covering major amendments and regulated contaminants lists as stipulated in the legislative acts most relevant to each water policy area, along with a set of technological patents pertaining to drinking water quality, wastewater treatment, and water quantity, over a period of more than 30 years. We find that, in general, the link between water regulation and innovation is both statistically and economically significant. New regulations on national drinking water standards are found to have a positive association with related patents, while amendments to the Clean Water Act are associated with more water pollution-reduction technologies