How does digital financial inclusion promote green total factor productivity in China? An empirical analysis from the perspectives of innovation and entrepreneurship

Abstract

Green total factor productivity (GTFP) is a critical indicator for measuring sustainable development, with profound implication for achieving a win-win situation of economic prosperity and environmental protection. However, little attention has been paid to understand the influence of emerging digital financial inclusion (DFI) on China’s GTFP growth. To address this research gap, this study employs the Malmquist-Luenberger index to measure the GTFP of 276 cities in China from 2011 to 2019, and then explores the impact of DFI on GTFP from the perspectives of innovation and entrepreneurship. The results show that the development of DFI significantly increases GTFP, which remains robust after variable replacement and endogenous treatment. At the micro-level, DFI is conductive to GTFP growth by promoting green innovation and entrepreneurial activity. Particularly, this study sheds light on the valid channel of green innovation patents in the relationship between DFI and GTFP whereas the mediating role of green utility models appears trivial. Heterogeneity analysis illustrates that the promotion effect of DFI on GTFP is more significant in the eastern area and non-resource-based cities. Therefore, in order to achieve sustainable development, the Chinese government should incorporate the development of DFI into the formulation of policies related to carbon mitigation.