A step toward inclusive green growth: can digital finance be the main engine?

Inclusive green growth (IGG) has become a worldwide consensus to achieve the target of sustainable development goals. Although the prominent role of digital finance (DF) against the pandemic has drawn considerable attention from policymakers, its plausible effect on IGG and underlying mechanisms have not been distinctly explored in academia. The aim of the study is to explore the causal effect of DF on IGG based on prefecture city-level data from 2011 to 2019 in China. To this end, we employed the non-radial direction distance function approach within the global production technology to evaluate the aggregate IGG performance and its three sub-dimensions. The empirical results demonstrate that DF exerts a significant promotional effect on urban IGG. This finding continues to survive in an extensive set of robustness checks using an alternative dependent variable, model specifications, instrumental variable, and difference-in-difference approaches to address the endogeneity concerns. Meanwhile, sub-dimensional regressions show that this positive effect is driven predominantly by the scale economy of DF, while the depth of usage and digitalization playing a minor role. Moreover, we uncover that DF enhances IGG by leveraging greater marginal product of labor rather than capital, improving environmental externalities, increasing fuller employment, and reducing rural-urban income inequality. However, we also reveal the dark side of DF on imbalanced regional development. The promotional effect of DF on IGG is only prominent for cities with better inherent comparative advantages, and we are thus likely to see a widening digital divide resulting from the "Matthew effect" on regional disparity without timely policy interventions.

Towards inclusive green growth: does digital economy matter?

In this decade, China has been pursuing an inclusive green growth strategy. Concurrently, the digital economy, which relies on the Internet of Things, big data, and artificial intelligence, has experienced explosive growth in China. The digital economy's capacity to optimize resource allocation and reduce energy consumption potentially makes it a conducive channel towards sustainability. Using the panel data of 281 cities in China from 2011 to 2020, we theoretically and empirically explore the impact of the digital economy on inclusive green growth. Firstly, we theoretically analyze the potential impact of the digital economy on inclusive green growth using two hypotheses: accelerating green innovation and promoting the industrial upgrading effect. Subsequently, we measure the digital economy and inclusive green growth of Chinese cities using Entropy-TOPSIS and DEA approaches, respectively. Then, we apply traditional econometric estimation models and machine learning algorithms to our empirical analysis. The results show that China's high-powered digital economy significantly promotes inclusive green growth. Moreover, we analyze the internal mechanisms behind this impact. We find that innovation and industrial upgrading are two plausible channels that explain this effect. Additionally, we document a nonlinear feature of diminishing marginal effects between the digital economy and inclusive green growth. The heterogeneity analysis shows that the contribution weight of the digital economy to inclusive green growth is more remarkable in eastern region cities, large and medium-sized cities, and cities with high marketization. Overall, these findings shed more light on the digital economy-inclusive green growth nexus and provide new insights into understanding the real effects of the digital economy on sustainable development.

Inclusive green growth for sustainable development of cities in China: spatiotemporal differences and influencing factors.

Inclusive green growth (IGG) based on coordinating the society, economy, and environment is a new way to reach sustainable development. However, there is a lack of relevant research in developing countries. To bridge this gap, based on a comprehensive index that includes economy, social, and environment, this study evaluates the urban inclusive green growth index (IGGI) of 282 in China from 2003 to 2020 and analyzes the spatiotemporal dynamics and regional differences. Moreover, the spatial Durbin model is employed to explore the plausible influencing factors of urban IGGI in China. The main results show an increasing trend of IGGI in Chinese cities and imbalanced spatiotemporal dynamics. Furthermore, the econometric regress results show that upgrade of industrial structure, opening up, human capital, and urban innovation have significant positive impact on urban IGGI, while the administrative capacity of the government and urban industrialization show negative impact on urban IGGI; human capital not only affects the local IGGI but also has significant spatial spillover effects to the surrounding cities. This finding provides new evidence for China to achieve its 2030 sustainable development goals and sheds lights on how policy can be improved to boost IGGI levels and achieve carbon neutrality in 2060.

Environmental regulation and technological innovation: evidence from China.

We analyze the real effects of the environmental regulation on technological innovation using an air pollution reduction governance policy promulgated in China under the 12th Plan in 2012. We treat the Air Pollution Prevention Policy as a quasi-natural experiment that is plausibly exogenous to the firms' innovation policy and thus use the difference in difference (DID) as an identification strategy in our analysis. We provide evidence that environmental regulation substantially promotes innovation productivity. Our findings reveal that this impact is more pronounced for state-owned firms, pollution-intensive industries, and high-tech-intensive industries. We uncover three possible underlying economic mechanisms through which the air pollution reduction policy impacts innovation. We show that government financing, external governance from the capital market, and R&D intensity are three underlying economic channels through which environmental regulation promotes technological innovation. Collectively this study's policy implication is that industrial policies that promote greener environments can enhance economic performance.