Two-way Fixed Effects Model Research Articles

The land finance and eco-product value nexus: Evidence from fiscal decentralization in China.

This study aimed to shed new light on the land finance and eco-product value nexus from the perspective of fiscal decentralization, using data collected from 276 Chinese prefectures between 2005 and 2020. We employed a two-way fixed effects model to explore land finance, fiscal decentralization, and the eco-product value nexus. Our findings revealed that land finance has a noticeable disincentive influence on eco-product value. The impact of land finance on the ecological value of wetlands is much higher than on that of other land types. Additionally, fiscal expenditure decentralization plays a negative regulatory role between land finance and eco-product value. This effect is further strengthened with an increase in the fiscal decentralization level. Our findings suggest that standardizing local government land-granting behavior and making land finance more ecologically friendly through policy implementation will effectively contribute to the sustainable development of China.

How does green finance affect the innovation performance of enterprises? Evidence from China.

"green" + "innovation" has become a new concept of development. The integration of the two can bring win-win for the environment and economy. This paper selects the annual data of 14309 A-share companies in Shanghai and Shenzhen Stock Exchange from 2012 to 2020 as the research sample. And it uses the two-way fixed effect model to empirically test the impact of green finance on enterprise innovation performance. The study found that the development of green finance can promote the improvement of enterprise innovation performance. The analysis of influence mechanism shows that the development of green finance can reduce the financing constraints of enterprises, and then improve the innovation performance of enterprises; the development of green finance can increase the R&D investment of enterprises, and then improve the innovation performance of enterprises; green finance development can increase corporate investment in environmental protection, which in turn can improve corporate innovation performance. The results of heterogeneity test analysis show that compared with the western region, private enterprises, small and medium-sized enterprises, and high energy consumption and high pollution enterprises, the development of green finance in the central and eastern regions, state-owned enterprises, large enterprises, and non double high enterprises has more obvious role in promoting enterprise innovation performance. Therefore, the government should issue relevant policies and actively promote green finance policies that can help improve environmental and economic issues.

Institutional and macroeconomic stability mediate the effect of auctions on renewable energy capacity

Renewable energy (RE) auctions have become an increasingly popular policy instrument for decarbonizing the global energy matrix, and have been rapidly adopted by several countries worldwide. Previous research has used data from higher-income countries and two-way fixed effects models to estimate the impact of auctions on RE capacity, mostly with favorable results. However, these studies did not account for heterogeneous treatment effects across units to explore whether auctions are also effective in countries with unstable business environments. We analyze whether auctions also foster RE in countries experiencing macroeconomic instability or poor institutional quality. For this purpose, this study has drawn from multiple publicly available databases to build a dataset comprising 98 countries from 2000 to 2020. Our definition of RE includes solar, wind, and biomass sources. We first cluster countries by the quality of their business environment and then perform a differences-in-differences analysis considering staggered treatment adoption. We find that auctions positively affect RE capacity, yet the average treatment effects are higher for countries with better business environments. Thus, governments should exercise caution in adopting this instrument, especially in countries that experience macroeconomic or institutional instability. At the same time, dynamic treatment effects suggest that the policy needs time to show results.

Digital Finance and Corporate Sustainability Performance: Promoting or Restricting? Evidence from China’s Listed Companies

The development of internet platforms and information technology has accelerated the transformation of conventional finance. Emerging digital finance is expected to optimize the allocation of credit resources and thereby promote a sustainable transition for corporations. However, whether, and to what extent, digital finance empirically affects this process is still not well understood. This paper investigates the role of digital finance in promoting corporate sustainability performance by exploring its impact on green enterprise innovation and its mechanism using a two-way fixed effects model and a mediating effects model. The findings suggest the following: (i) The impact of digital finance on the sustainable performance of enterprises follows a U-shaped (coef. = 0.00, t = 2.43) pattern, where digital finance initially restricts and then promotes the sustainable performance of enterprises. This conclusion remains robust even after considering endogeneity. (ii) The mechanism analysis indicates that digital finance enhances sustainability performance by reducing corporate financial volatility (coef. = −0.00, t = −4.06) and promoting long-term performance growth (coef. = 6.69, t = 4.88). (iii) The positive effects of digital finance on sustainability performance are more significant for non-state-owned firms (coef. = 0.00, t = 5.42), firms located in cities with a lower GDP per capita (coef. = 0.00, t = 2.40), and smaller firms (coef. = −0.00, t = −2.59) in their initial stages. These results imply that China should accelerate digitization in the financial markets and thus further develop its potential for sustainable development.

The Impacts of Executive Equity on Green Corporate Innovation

Executive stock incentives, as an important tool for attracting talent and achieving long-term development goals, have a profound impact on the development of green innovation in enterprises. Based on this, this article uses data from Chinese listed companies from 2007 to 2020 and employs a two-way fixed effects model and a two-stage least squares method to explore the impact of executive stock incentives on green innovation in China. The study found that executive stock incentives have a significant positive impact on green innovation in enterprises. This promotional effect is more pronounced in non-state-owned enterprise groups characterized by operating losses, reduced institutional holdings, and fewer negative media reports. Mechanism analysis suggests that increasing the intensity of executive stock incentives can enhance profitability, increase tolerance for failure, and promote increased investment in green innovation. Finally, based on the conclusions, relevant policy implications are drawn.

Internet Development and Urban–Rural Consumption Inequality: Evidence from Chinese Cities

The impact of the digital dividends from Internet development on urban and rural residents is influenced by the existing urban–rural dual structure, resulting in heterogeneous and time-varying impacts on urban–rural consumption inequality. This study aims to investigate the nonlinear effect and mechanism of the Internet development on urban–rural consumption inequality in China. Using panel data from 263 prefecture-level cities between 2016 and 2019, we employ a two-way fixed effect model and a threshold model to examine this relationship. The findings of our study are as follows: (a) Internet development exhibits a U-shaped relationship with urban-rural consumption inequality. This U-shaped relationship is statistically consistent and stable in the whole country and in cities outside the five major urban agglomerations. (b) The level of urbanization acts as a threshold for the relationship between Internet development and urban–rural consumption inequality. (c) The influence of Internet development on urban–rural consumption inequality operates through its impact on income inequality and premature industrial structure. To effectively harness the positive impact of Internet development in reducing urban–rural consumption inequality, several key aspects deserve attention: acknowledging regional disparities and leveraging the Internet’s positive impact on urban–rural consumption inequality, considering the joint effects of Internet and urbanization developments, addressing digital divides among vulnerable groups, and promoting effective integration between the Internet and industry, particularly in manufacturing.

The Impact of Internet Development on Green Economic Growth: Evidence from China

In the context of "Carbon Peaking and Carbon Neutrality", digital technologies, such as Internet, is now playing an increasingly prominent role in the economic and social development, serving as an engine in the green transformation and growth of the economy. Based on a two-way fixed effect model (TWFEM), this study researches the impact of Internet development (ID) on green economic growth (GEG), utilizing panel data for 30 Chinese provinces from 2006 to 2020. This study draws the following five main conclusions. Firstly, ID has a significant contribution to GEG in China. Secondly, compared to the central and western regions of China, the impact of ID on GEG is stronger in the east. Thirdly, the positive impact of ID on GEG was stronger after the 18th National Congress of the Communist Party of China (NCCPC) in 2012. Fourthly, ID promotes China's GEG mainly through promoting economic growth and improving pollution control. Fifthly, government intervention weakens the impact mechanism, while market development enhances it. After a series of robustness tests, the above findings remain valid, boosting important implications for furthering the coordinated development of the digital and green economies.

How does Sci-tech Finance Affect the Structural Upgrading of China's Service Industry?

Combined with the rise of science and technology finance(sci-tech fin) in the current digital age, this paper selects panel data of 30 provinces and cities from 2011 to 2020 to build a two-way fixed effect model, and empirically analyzes the influence of fintech on the structural upgrading of Chinese service industry. The results show that sci-tech finance significantly positively pushes forward the structural upgrading of the service sector with regional heterogeneity, which is specifically manifested in the positive promoting effect on the central and western areas. Additionally, the level of financial regulation and government expenditure can enhance the influence of sci-tech finance on the service industry structure promoting. Based on this, the paper puts forward some policy suggestions on developing sci-tech finance and deepening the combination of technology finance and service industry.

The Impact of Financial Competition on Carbon Emissions

Based on the panel data of 30 provinces (municipalities, autonomous regions) in China from 2003 to 2019, this paper constructs a two-way fixed effect model to analyze the influence of financial competition on carbon emissions. It is found that fiscal expenditure competition and tax competition will push up local carbon emission intensity. The analysis of regional heterogeneity shows that the financial competition in the eastern region has no significant impact on carbon emission intensity, while the financial competition in the central and western regions has a more obvious impact on carbon emission intensity. The analysis of time heterogeneity shows that after China’s economy entered a new normal in 2012, the impact of financial competition on carbon emission intensity was significantly enhanced. Meanwhile, considering the influence of financial autonomy on carbon emissions, this paper constructs related intersection terms, which further reflect the role of financial autonomy.

How Does Digital Finance Affect the Burden of Real Enterprises: Evidence from China

By mainly studying how digital finance affects the burden of real enterprises, this paper utilizes the two-way fixed effect model to test whether the burden of industrial enterprises above the designated size can be largely reduced by digital finance. The following results are found: (1) Digital finance can generally reduce the cost ratio by a large margin. (2) The breadth and depth of digital finance enable a positively significant influence on decreasing the cost rate of enterprises, but the degree of digitalization is the opposite. (3) Among the eastern, central, and western regions in China, only the industrial enterprises above the designated size in the eastern regions are significantly affected by digital finance, which reduces their cost ratio. On this premise, this paper aims to leverage the advantages of digital finance to help related industries and enterprises as well as strengthen regional synergy. Besides, relevant government departments need to provide suggestions on digital financial supervision and innovation assistance. This paper offers a reference that makes a difference for the research pertinent to digital finance.

Research on Coupling Mechanism between Digital Inclusive Finance and Scientific and Technological Innovation: Spatiotemporal Characteristics and its Driving Factors

Based on the coupling and coordinated development mechanism of digital inclusive finance and scientific and technological innovation, the evaluation indexes for digital inclusive finance and scientific and technological innovation are constructed respectively. Besides, the coupling and coordinated development relationship and their driving factors in 30 provinces and cities from 2011 to 2021 are studied by using the evaluation model via the entropy weight method, coupling and coordination model, and two-way fixed effect model. The results are as follows. 1) Obvious regional differences exist in the coupling coordination between digital inclusive finance and scientific and technological innovation in China, which is high in the east and the south but low in the west and the north, although such differences are decreasing year by year .2) Using the two-way fixed effect model shows that the development of foreign trade, human capital, financial support, and other factors have a high correlation with the coupling and coordinated development of digital inclusive finance and science and technology innovation system. Premised on the existing research, this paper further analyzes the coupling and coordination of digital inclusive finance and scientific and technological innovation in various provinces of China at present, including time and space dimensions, which provides practical strategic guidance for the government to promote the coordinated development of them, leaving profound lessons for improving the national science, technology, and finance.

Study on the Coordination of New Urbanization and Water Ecological Civilization and Its Driving Factors: Evidence from the Yangtze River Economic Belt, China

For sustainable development of the world, it is crucial to solve the problems related to water environment pollution, water shortage, and the inefficient utilization of water resources during the process of urbanization in developing countries. At present, scholars mainly focus on the measurement of new urbanization (NU) and the water ecological civilization (WEC) level and the coordination relationship between NU and ecological civilization. However, there have been few studies on the coordination relationship between NU and WEC and its driving factors. We take the Yangtze River Economic Belt (YREB) in China as a case study, construct the indicator system of NU and WEC, analyze the current situation of NU and WEC in the YREB, and study the coordination state of NU and WEC in the YREB from 2011 to 2020 by using a state coordination function. We further examine the factors driving the coordination of NU and WEC by employing a two-way fixed-effects model. The results show the following: (1) The growth rate of NU and WEC in the YREB shows a fluctuating upward trend, where there is significant heterogeneity between the upper reaches, the middle reaches, and the lower reaches of the YREB. (2) The static coordination degree of NU and WEC in the YREB shows a trend of fluctuating upwards and then falling, and the dynamic coordination degree deviated from the coordinated development trajectory from 2018 to 2020. The classification of the static coordination degree of various regions in the YREB gradually becomes obvious with significant spatial aggregation characteristics, and the dynamic coordination degree of various regions has significant heterogeneity. (3) The opening-up degree, foreign direct investment, population growth, and urban–rural income gap are not advantageous to the coordination degree, while the marketization level, industrial structure, and human capital are advantageous to the coordination degree, but the regression coefficients of the latter two are not significant. The regional regression results show that the impacts of driving factors on the coordination degree have obvious heterogeneity. The research results provide a new idea and method that can be used by developing countries similar to the YERB to control water pollution, improve the ecological environment, alleviate water shortages, and improve the level of WEC in the process of NU.

Digital finance and the Efficiency of Financial Support for The Real Economy: Empirical Evidence from China

Based on the provincial panel data from 2013 to 2020 in China, this paper uses the two-way fixed effect model and the Dynamic System GMM model to study the relationship between the development of digital finance and the improvement of the efficiency of financial support for the real economy. The results show that: Digital finance can significantly improve the efficiency of financial support to the real economy in China; Structural heterogeneity shows that, compared with the degree of digitization, the effectiveness of coverage and depth indicators to improve the efficiency of financial support for the real economy is stronger; Regional heterogeneity shows that the impact of digital Finance on the efficiency of financial support to the real economy in the central and eastern regions is stronger than that in the western regions.

Can Local Government Debt Decrease the Pollution Emission of Enterprises?—Evidence from China’s Industrial Enterprises

The rapid growth of local government debt size in China has aroused the attention of academia and policy circles due to its impact on environmental pollution. This paper aims to explore the impact of local government debt size on corporate pollution emissions and its mechanism. This paper uses the China Local Government Debt Database, Industrial Enterprise Database, and Industrial Enterprise Pollution Database from 2006 to 2013, and adopts the two-way fixed effect model and difference-in-differences method to conduct an empirical analysis of industrial enterprises in 31 provinces of China. The results show that the local government debt size has a significant positive impact on corporate pollution emissions, and each unit increase in the local government debt size leads to an increase of 0.002 units in corporate pollution emissions. Further mechanism tests show that this effect is realized through the expansion of regional fixed asset investment and the reduction of enterprise R&D investment. In addition, there is significant heterogeneity among enterprises of different ownership, location, and industry. This paper provides practical references for local governments and micromarket actors to improve environmental protection and debt governance in the new era.

The Impact of Green Innovation on Carbon Emissions: Evidence from the Construction Sector in China

Green innovation has been identified as a viable strategy to mitigate the tension between industrial change and pollutant emissions. Relevant research should focus more on the impact of eco-friendly innovations on carbon emissions. Consequently, using a panel data set that covers 30 Chinese provinces from 2005 to 2020, we examine whether there is a carbon-abatement effect of green innovation in the construction sector. According to the findings of a two-way fixed-effects model, green innovation substantially positively influences reduction in dioxide emissions in the Chinese construction industry. The results of a panel threshold model show a significant non-linear relationship between green innovation and carbon emissions when the environmental regulation intensity is used as the threshold variable. Furthermore, we discovered that green innovation cuts carbon emissions considerably through environmental regulation. Finally, the impact of abatement varies significantly between regions, innovation elements, and types of development.

Effects of Digital Inclusive Finance on Adverse Selection of Commercial Banks

The development of digital inclusive finance has changed commercial banks' credit to some extent. We construct the panel data of commercial banks from 2011-2021 and use a two-way fixed effect model to study effects of digital inclusive finance on the adverse selection of commercial banks. The results show that digital inclusive finance has a significant negative effect on adverse selection of commercial banks, and the effect is stronger in eastern regions and rural commercial banks. The evidence strongly suggests that digital inclusive finance reduces the risk of adverse selection of commercial banks by promoting the development of financial technology and reducing the risky asset ratio of commercial banks in a way that excludes the mechanism of action of commercial bank soundness. These results have important implications for the development of the traditional financial industry, and commercial banks could use digital inclusive finance to reduce adverse selection risk and achieve digital transformation.

The welfare state and the roles of social capital in subjective well-being: The crowding-out and crowding-in arguments revisited

Abstract In international comparative research, significant advances have been made in the study of the effect of social capital and the welfare state on subjective well-being (SWB). However, few studies have examined how the welfare state influences the impact of social capital on SWB. To fill this gap, from the perspectives of the crowding-out and crowding-in hypotheses, this study explores whether welfare provisions alter the role of three dimensions of social capital – namely, social trust, formal social contact, and informal social contact, in SWB. The present study utilises international comparative data from nine waves of the European Social Survey of 2002 to 2019 and a two-way fixed-effects model to evaluate the cross-level interaction effects of welfare provisions and the three dimensions of social capital on SWB. This analysis reveals that welfare spending strengthens the positive association between social capital and SWB.

Exploring the impact mechanism of executives' environmental attention on corporate green transformation: evidence from the textual analysis of Chinese companies' management discussion and analysis.

The allocation of executives' environmental attention (EEA) is of great significance in promoting the green upgrading of industrial structures and achieving corporate green transformation. Based on upper echelon theory and the attention-based view, we use panel data of Chinese manufacturing companies from 2015 to 2020 to construct a two-way fixed effects model to explore the impact mechanism of EEA on corporate green transformation performance (CGTP). Baseline regression shows that EEA significantly improves CGTP. The reliability of findings is verified by reducing time windows, replacing the independent variable, expanding the data source, and adding missing variables. In the heterogeneity analysis, the positive effect of EEA on CGTP is significant for eastern companies and does not differ in the property rights grouping. After propensity score matching, environmental attribute grouping shows that the positive effect of EEA on CGTP is more significant for non-heavy polluters. Extended research shows that government subsidies have a positive moderating effect, while female executives play only a symbolic role. Moreover, green innovation activities have positive partial mediating effects. Green innovation is the best way to address environmental pollution and achieve corporate green transformation. Our research provides implications for decision-makers to allocate their attention, and thereby achieve green development appropriately.

Impacts of environmental policy uncertainty on urban environmental pollutant emissions in China: a study based on textual analysis

Studies mainly focuses on measuring the economic policy uncertainty in different countries. However, few studies have focused on the construction of the environmental policy uncertainty index (EPUI). This paper selects 460 newspapers from the China National Knowledge Infrastructure (CNKI) newspaper database from 2001 to 2016, and uses the text analysis method to directly construct the national, provincial, and prefecture-level EPUI of China. We have analyzed the distribution and fluctuation trend of the EPUI, and use two-way fixed effect model with panel data to investigate the impact of environmental policy uncertainty on environmental pollutant emissions at the city level. An important discovery has been made through our research, indicating that the rise in environmental policy uncertainty is likely to result in a reduction of pollutant emissions such as urban industrial sulfur dioxide and carbon dioxide. However, this reduction comes at a cost to the promotion of the development of urban secondary industry. The Chinese EPUI constructed for the first time in this article provides significant basic data for research in the environment and energy fields, and also provides important empirical evidence for achieving China’s carbon peak and carbon neutrality goals.

Research on the nexus between the digital economy and carbon emissions -Evidence at China's province level

China is currently entering the era of the digital economy. Further development of the digital economy may provide a new dynamic mechanism to achieve carbon peak and carbon neutrality goals. Therefore, the digital economy activities in the process of reducing carbon emissions need to be urgently discussed. Using a panel dataset covering 30 Chinese provinces from 2013 to 2020, a two-way fixed effect model was employed to analyze the impact of the digital economy on carbon emissions. The results indicated that, during the study period, regional differences in the level of digital economy development were large. In addition, the spatial pattern showed a decrease from east to west. The development of the digital economy significantly reduced the intensity of carbon emissions. This conclusion that was supported by robustness tests and endogenous analysis. Moreover, this effect exhibited heterogeneity with respect to energy consumption, sub-indicators of the digital economy, and policy support. Additionally, government support positively moderated the relationship between the digital economy and carbon emissions. This moderating effect also showed heterogeneity. Most importantly, the relationship between the digital economy and carbon emissions was transmitted through different dimensions of science and technology innovation. These findings provide a further scientific basis for developing the digital economy and promoting green development, which is beneficial for achieving carbon peak and carbon neutrality.