Impact of green finance on green total factor productivity: New evidence from improved synthetic control methods

Abstract

Although green finance policy is essential for sustainable development, its impact on green development is often underestimated. Using city-level data in China from 2009 to 2022, this study identifies the causal effect of green finance policy on green total factor productivity (GTFP) through an improved synthetic control method. The findings are as follows: First, green finance positively influences GTFP growth, and this effect increases over time. Second, the baseline results remain robust when tested using alternative estimation methods and information criteria. Third, the mechanism analysis shows that green finance policy enhances GTFP through the optimization of energy structure and technological innovation. This study provides new evidence that green finance promotes green development and contributes to addressing global climate change.