IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v15y2023i14p11204-d1196843.html
   My bibliography  Save this article

Does Green Finance Promote Green Total Factor Productivity? Empirical Evidence from China

Author

Listed:
  • Ke Xu

    (School of Economics and Management, Northwest University, Xi’an 710127, China
    School of International Law, Northwest University of Political Science and Law, Xi’an 710122, China)

  • Peiya Zhao

    (School of Economics and Management, Northwest University, Xi’an 710127, China)

Abstract

Green economic growth is a major challenge for countries, as it requires achieving both ecological protection and economic development goals simultaneously. It can be expressed as the continuous growth of green total factor productivity (GTFP), which is the core indicator reflecting the simultaneous achievement of environmental and economic sustainability. This study provides an in-depth understanding of how green finance contributes to GTFP with data from 30 Chinese provinces between 2006 and 2021. The results reveal that green finance has a significant promotion effect on GTFP as well as a significant spatial spillover effect. By splitting GTFP into green technological progress and green efficiency improvement, green finance can improve the former but not the latter. Green finance can influence GTFP through the mechanisms of technological innovation and industrial structure upgrading, both of which can also only drive green technological progress but not green efficiency improvement. Regional heterogeneity suggests that the promotion effect of green finance on GTFP tends to be stronger and can significantly contribute to green efficiency improvement in regions with higher economic levels. The heterogeneity of natural resource endowment reveals that this promotion effect is more significant in resource-rich areas, but green finance still cannot significantly promote green efficiency improvement in these regions. In contrast, green finance can significantly enhance both green technological progress and green efficiency improvement in resource-general areas. The heterogeneity of the information technology level shows that this promotion is more significant in regions with higher levels of information technology, and in particular, the enhancement of green efficiency improvement by green finance in these regions is significantly positive. The findings provide valuable recommendations.

Suggested Citation

  • Ke Xu & Peiya Zhao, 2023. "Does Green Finance Promote Green Total Factor Productivity? Empirical Evidence from China," Sustainability, MDPI, vol. 15(14), pages 1-26, July.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:14:p:11204-:d:1196843
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/15/14/11204/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/15/14/11204/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
    2. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    3. Calderon, Cesar & Liu, Lin, 2003. "The direction of causality between financial development and economic growth," Journal of Development Economics, Elsevier, vol. 72(1), pages 321-334, October.
    4. Chambers, Robert G. & Fare, Rolf & Grosskopf, Shawna, 1996. "Productivity Growth in APEC Countries," Working Papers 197843, University of Maryland, Department of Agricultural and Resource Economics.
    5. Fan, Ying & Liao, Hua & Wei, Yi-Ming, 2007. "Can market oriented economic reforms contribute to energy efficiency improvement? Evidence from China," Energy Policy, Elsevier, vol. 35(4), pages 2287-2295, April.
    6. He, Yu & Liu, Ruizhi, 2023. "The impact of the level of green finance development on corporate debt financing capacity," Finance Research Letters, Elsevier, vol. 52(C).
    7. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    8. Berensmann, Kathrin & Lindenberg, Nannette, 2016. "Green finance: actors, challenges and policy recommendations," Briefing Papers 23/2016, German Institute of Development and Sustainability (IDOS).
    9. Peneder, Michael, 2003. "Industrial structure and aggregate growth," Structural Change and Economic Dynamics, Elsevier, vol. 14(4), pages 427-448, December.
    10. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    11. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    12. Qiang, Qiu & Jian, Chen, 2020. "Natural resource endowment, institutional quality and China's regional economic growth," Resources Policy, Elsevier, vol. 66(C).
    13. William Brock & M. Taylor, 2010. "The Green Solow model," Journal of Economic Growth, Springer, vol. 15(2), pages 127-153, June.
    14. Liu, Sheng & Wang, Yukai, 2023. "Green innovation effect of pilot zones for green finance reform: Evidence of quasi natural experiment," Technological Forecasting and Social Change, Elsevier, vol. 186(PA).
    15. Adam B. Jaffe & Karen Palmer, 1997. "Environmental Regulation And Innovation: A Panel Data Study," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 610-619, November.
    16. Robert M. Solow, 1974. "The Economics of Resources or the Resources of Economics," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 12, pages 257-276, Palgrave Macmillan.
    17. Khoshnava, Seyed Meysam & Rostami, Raheleh & Zin, Rosli Mohamad & Kamyab, Hesam & Abd Majid, Muhd Zaimi & Yousefpour, Alireza & Mardani, Abbas, 2020. "Green efforts to link the economy and infrastructure strategies in the context of sustainable development," Energy, Elsevier, vol. 193(C).
    18. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, vol. 74(2), pages 429-447, August.
    19. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
    20. Lee, Chien-Chiang & Wang, Chih-Wei & Ho, Shan-Ju, 2022. "Financial aid and financial inclusion: Does risk uncertainty matter?," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    21. Rolf Färe & Shawna Grosskopf & Carl A Pasurka, Jr., 2001. "Accounting for Air Pollution Emissions in Measures of State Manufacturing Productivity Growth," Journal of Regional Science, Wiley Blackwell, vol. 41(3), pages 381-409, August.
    22. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    23. Sharma, Siddharth, 2007. "Financial development and innovation in small firms," Policy Research Working Paper Series 4350, The World Bank.
    24. Shixian Ling & Tianyue Pei & Zhaohui Li & Zhiping Zhang, 2021. "Impact of COVID-19 on Financial Constraints and the Moderating Effect of Financial Technology," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(6), pages 1675-1688, May.
    25. Martínez-Zarzoso, Inmaculada & Bengochea-Morancho, Aurelia & Morales-Lage, Rafael, 2019. "Does environmental policy stringency foster innovation and productivity in OECD countries?," Energy Policy, Elsevier, vol. 134(C).
    26. Mao, Wenxin & Wang, Wenping & Sun, Huifang & Yao, Peiyi & Wang, Xiaolei & Luo, Dang, 2021. "Urban industrial transformation patterns under natural resource dependence: A rule mining technique," Energy Policy, Elsevier, vol. 156(C).
    27. Elsadig Musa Ahmed, 2007. "The Impact of Biochemical Oxygen Demand Emissions on Malaysia's Manufacturing Productivity Growth," Global Economic Review, Taylor & Francis Journals, vol. 36(4), pages 305-319.
    28. Elaine Romanelli & Olga M. Khessina, 2005. "Regional Industrial Identity: Cluster Configurations and Economic Development," Organization Science, INFORMS, vol. 16(4), pages 344-358, August.
    29. Cockx, Lara & Francken, Nathalie, 2016. "Natural resources: A curse on education spending?," Energy Policy, Elsevier, vol. 92(C), pages 394-408.
    30. Lydia Greunz, 2004. "Industrial structure and innovation," ULB Institutional Repository 2013/9461, ULB -- Universite Libre de Bruxelles.
    31. Oh, Dong-hyun & Heshmati, Almas, 2010. "A sequential Malmquist-Luenberger productivity index: Environmentally sensitive productivity growth considering the progressive nature of technology," Energy Economics, Elsevier, vol. 32(6), pages 1345-1355, November.
    32. Peng Li & Yaofu Ouyang, 2020. "Technical Change and Green Productivity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 271-298, July.
    33. Yu Hao & Yunxia Guo & Haitao Wu, 2022. "The role of information and communication technology on green total factor energy efficiency: Does environmental regulation work?," Business Strategy and the Environment, Wiley Blackwell, vol. 31(1), pages 403-424, January.
    34. Wang, Xinyue & Wang, Qing, 2021. "Research on the impact of green finance on the upgrading of China's regional industrial structure from the perspective of sustainable development," Resources Policy, Elsevier, vol. 74(C).
    35. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    36. Ronaldo, Reza & Suryanto, Tulus, 2022. "Green finance and sustainability development goals in Indonesian Fund Village," Resources Policy, Elsevier, vol. 78(C).
    37. Najam, Hina & Abbas, Jawad & Álvarez-Otero, Susana & Dogan, Eyup & Sial, Muhammad Safdar, 2022. "Towards green recovery: Can banks achieve financial sustainability through income diversification in ASEAN countries?," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 522-533.
    38. Lydia Greunz, 2004. "Industrial structure and innovation - evidence from European regions," Journal of Evolutionary Economics, Springer, vol. 14(5), pages 563-592, December.
    39. Mr. Sergio Rebelo & Ms. Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    40. Hu, Guoqiang & Wang, Xiaoqi & Wang, Yu, 2021. "Can the green credit policy stimulate green innovation in heavily polluting enterprises? Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 98(C).
    41. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Linmei Cai & Jinsuo Zhang, 2024. "Does Green Finance Improve Industrial Energy Efficiency? Empirical Evidence from China," Energies, MDPI, vol. 17(19), pages 1-25, September.
    2. Min Zhang & Chengrong Li & Jinshan Zhang & Hongwei Chen, 2023. "How Green Finance Affects Green Total Factor Productivity—Evidence from China," Sustainability, MDPI, vol. 16(1), pages 1-18, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Rui & Qi, Zhongying & Shu, Yumin, 2020. "Multiple relationships between fixed-asset investment and industrial structure evolution in China–Based on Directed Acyclic Graph (DAG) analysis and VAR model," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 222-231.
    2. Jin, Wei & Shi, Xunpeng & Zhang, Lin, 2021. "Energy transition without dirty capital stranding," Energy Economics, Elsevier, vol. 102(C).
    3. Hartwig, Jochen, 2012. "Testing the growth effects of structural change," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 11-24.
    4. Xie, Ronghui & Teo, Thompson S.H., 2022. "Green technology innovation, environmental externality, and the cleaner upgrading of industrial structure in China — Considering the moderating effect of environmental regulation," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    5. Kluge, Jan & Lappoehn, Sarah & Plank, Kerstin, 2020. "The Determinants of Economic Competitiveness," IHS Working Paper Series 24, Institute for Advanced Studies.
    6. David Jones & Corrado Di Maria & Simone Valente, 2021. "Financial Intermediation and Structural Change: Theory and Evidence," University of East Anglia School of Economics Working Paper Series 2021-06, School of Economics, University of East Anglia, Norwich, UK..
    7. Jin, Wei & van der Ploeg, Frederick & Zhang, Lin, 2024. "How clean capital slows down disinvestment of carbon-intensive capital in the low-carbon transition," Journal of Economic Dynamics and Control, Elsevier, vol. 162(C).
    8. Dalila Nicet-Chenaf & Eric Rougier, 2009. "Human capital and structural change: how do they interact with each others in growth," Post-Print hal-00798441, HAL.
    9. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    10. William F. Blankenau & Steven P. Cassou, 2009. "Industrial Dynamics And The Neoclassical Growth Model," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 815-837, October.
    11. Hirakata, Naohisa & Sunakawa, Takeki, 2019. "Financial frictions, capital misallocation and structural change," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    12. Laurent Cavenaile & Christian Gengenbach & Franz Palm, 2014. "Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis," De Economist, Springer, vol. 162(1), pages 19-40, March.
    13. Joseph K. Kaboski, 2009. "Education, Sectoral Composition and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 168-182, January.
    14. James B. Ang, 2008. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 536-576, July.
    15. Dietrich, Andreas & Krüger, Jens J., 2010. "Long-run sectoral development: Time-series evidence for the German economy," Structural Change and Economic Dynamics, Elsevier, vol. 21(2), pages 111-122, May.
    16. William Bednar & Nick Pretnar, 2019. "Home Production with Time to Consume," 2019 Meeting Papers 328, Society for Economic Dynamics.
    17. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    18. Bonatti, Luigi & Felice, Giulia, 2008. "Endogenous growth and changing sectoral composition in advanced economies," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 109-131, June.
    19. Weller, Jürgen & Kaldewei, Cornelia, 2013. "Empleo, crecimiento sostenible e igualdad," Macroeconomía del Desarrollo 35881, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    20. Anne Villamil & Xiaobing Wang & Yuxiang Zou, 2020. "Growth and development with dual labor markets," Manchester School, University of Manchester, vol. 88(6), pages 801-826, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:15:y:2023:i:14:p:11204-:d:1196843. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.