Does financial inclusion achieve the dual dividends of narrowing carbon inequality within cities and between cities? Empirical evidence from China

Abstract

Narrowing carbon inequality is crucial for coordinated and sustainable development. Based on a dataset of 283 Chinese cities for the period 2011–2017, and by employing the instrumental variable-generalized method of moments (IV-GMM) model, we test whether financial inclusion can achieve the dual dividends of inhibiting carbon inequality not only within cities, but also between cities. Further, this paper pays attention to the heterogeneous, direct, and indirect impacts of financial inclusion on carbon inequality. (1) The first finding is that financial inclusion achieves the dual dividends of narrowing carbon inequality within and between cities. (2) The mitigation effect of financial inclusion on carbon inequality is heterogeneous in terms of cities' administrative hierarchy, geographical location, and economic scale. (3) Six aspects of financial inclusion lead directly to the mitigation of carbon inequality. (4) The inhibitory effect of financial inclusion on carbon inequality is caused mainly by reduced intensity of carbon emissions and income inequality, which are two effective mediators. These findings help us devise solutions for eradicating carbon inequality by designing policies related to financial inclusion.