Financial development, openness, innovation, carbon emissions, and economic growth in China

Abstract

Drawing on balanced panel data of 30 Chinese provinces in 1987–2017, this paper examines the impact of carbon emissions on economic growth through the panel smooth transition regression model. Estimation is conducted based on the whole sample as well as the northern region and southern region subsamples. Empirical results reveal that: i) noticeable non-linear relationships do exist among carbon emissions, financial development, openness, innovation, and economic growth; and ii) carbon emissions attenuate the promoting effects of financial development and innovation on economic growth, which is also confirmed by using energy consumption as the transition variable; and iii) subsample estimations further discover that the impact of carbon emissions on economic growth is significantly different between the two regions, with the northern region having a lower carbon emissions threshold but quicker transition speed.