How does digital finance affect environmental total factor productivity: A comprehensive analysis based on econometric model

Abstract

The promotion of environmental total factor productivity (ETFP) is the key to ensure the sustainable development. As an important way of resource allocation, digital finance plays a significant role in regional ETFP. This study employs global Malmquist-Luenberger productivity index, based on super SBM directional distance function, to estimate the China's regional ETFP from the perspective of sustainable development. Furthermore, this paper adopts dual-effect fixed regression model, spatial econometric model and threshold model to verify the impact of digital finance on provincial ETFP. Results show that: (1) ETFP in China presents a trend of improvement, and the driving force is technological progress. The spatial distribution is in accordance with the “East, middle and West” gradient distribution; (2) Digital finance inhibits the improvement of ETFP, which shows nonlinear characteristics. The impact of digital finance on restraining ETFP will gradually weaken with the development of digital finance. In terms of decomposition terms, the coverage breadth and usage depth of digital finance have inhibitory action on the betterment of ETFP; (3) Digital finance can promote the regional ETFP of the surrounding areas, and the potential reason may be the “siphon effect”. Therefore, it is essential to further guide financial resources to enterprises and industries with high environmental benefits. (4) There is also significant heterogeneity in the impact of digital finance on ETFP. This study explores from the two aspects of region and material capital, and finds that the more backward the economy is, the more significant the inhibition effect is.