Green growth in pilot zones for green finance and innovation

Abstract

Substantial literature has acknowledged the efficacy of green finance policies in environmental enhancement, but their impact on green growth remains understudied. This paper employs a quasi-natural experiment to investigate the effect of the Green Finance Reform and Innovation Pilot Zones (GFPZ) policy on green growth in 288 prefecture-level cities in China over the period 2010–2021. The findings indicate that the GFPZ policy significantly promotes urban green growth, measured by green total factor productivity, with technical change as the primary driver. The findings survive Difference-in-Difference (DID), Propensity Score Matching-DID (PSM-DID), Synthetic DID (SDID), and other robustness checks. Mechanism analyses show that the GFPZ policy promotes urban green growth by advancing green financial instruments, constructing green infrastructure, increasing public transport accessibility, and optimizing the energy structure. Heterogeneity analyses show that the policy's effect on green growth is more pronounced in cities with lower fiscal pressure, greater energy endowment, and lower pollutant and greenhouse gas emissions. The spillover effect analysis indicates that green growth extends to cities located within approximately 250 km from the GFPZs. These findings offer important policy implications as governments optimize green finance initiatives for promoting urban sustainable development across regions.