Green credit policies and labor income share: Evidence from China

Abstract

This paper investigates the impact of green credit policies on the labor income share of heavily polluting firms using panel data from Chinese listed companies (2007–2022) and the 2012 Green Credit Guidelines as a quasi-natural experiment. The findings reveal that green credit policies significantly reduce the labor income share of these firms, as confirmed by parallel trend tests and robustness checks. Heterogeneity analysis indicates no regional differences in the policy's impact but significant variations by ownership, with non-state-owned enterprises most affected. Mechanism analysis shows that green credit policies decrease employment and the proportion of R&D personnel in heavily polluting firms, resulting in a crowding-out effect on labor income share.