Digital inclusive finance and green total factor productivity growth in rural areas

Abstract

Transitioning to environmentally friendly economic growth is crucial for achieving sustainable development. Digital inclusive finance (DIF) can promote environmentally friendly economic activities and play a crucial role in fostering green and low-carbon development. In this context, a fundamental research question revolves around the theoretical foundations of how DIF impacts the growth of green total factor productivity (GTFP) and whether this relationship can be empirically verified. This question is particularly relevant for rural areas where financial innovations are necessary for the advancement of businesses and society as a whole. Additionally, expanding DIF can bring benefits to the environment, which is affected by agricultural activities. Therefore, it is important to assess the mechanisms behind the development of DIF and its impact on agricultural productivity growth. This paper presents an analysis of the interaction between DIF and GTFP growth in China's agricultural sector. Panel data from 2012 to 2019 at the province level are used for this analysis. The results reveal that GTFP and DIF demonstrate similar growth patterns, with DIF significantly contributing to GTFP growth. DIF can enhance GTFP by promoting information channels and fostering innovation in green technologies.