Source

Journal of Zhongnan University of Economics and Law, Issue No. 2, 2024

Author

Song Qinghua (Zhongnan University of Economics and Law)

Zhou Xueqin (Zhongnan University of Economics and Law)

Content Abstract

During the critical period of China's economic transformation, it is essential to achieve inclusive growth that promotes equitable social welfare and coordinated urban-rural development, as well as green development that embodies low-carbon, environmentally-friendly practices, and reduced emissions. The question arises: Can financial technology (fintech) simultaneously foster inclusive economic growth and green development, thereby enhancing the inclusive green total factor productivity of cities? And if so, what mechanisms are involved? Does the disparity in urban resource endowments lead to differential impacts of financial technology on inclusive green total factor productivity?

To address these questions, this paper empirically examines the impact and mechanisms of financial technology on the inclusive green total factor productivity of cities, utilizing data from 284 prefecture-level and above cities in China from 2011 to 2019. The findings indicate a significant promotion of inclusive green total factor productivity by financial technology, mainly reflected in the substantial improvement of the technological progress index. This conclusion remains robust after a series of endogeneity treatments and robustness checks. Mechanism analysis reveals that financial technology can enhance inclusive green total factor productivity by fostering green innovation, increasing environmental protection investments, and stimulating entrepreneurial vitality. Heterogeneity analysis shows that the enhancement effect of financial technology on inclusive green total factor productivity is more pronounced in cities with higher levels of human capital, financial development, and infrastructure.

Based on these findings, the paper proposes the following policy implications. First, actively promote the construction of a financial technology service system to optimize the effect of fintech on inclusive green total factor productivity. Government departments should accelerate the regulated application of technologies such as cloud computing, big data, blockchain, and artificial intelligence, enhancing the execution efficiency of fintech. This would enable the profound integration of finance and technology and fully leverage the comprehensive empowerment effect of fintech on the inclusive green total factor productivity of cities. Second, enhance the innovative and entrepreneurial vigor of urban economic entities and broaden the transmission pathways between financial technology and inclusive green economic growth. Financial technology should be guided to provide sufficient funds for various urban economic entities to conduct green innovation and environmental protection investments. Opportunities and resources for entrepreneurship should also be provided to residents in remote areas, thus enhancing regional innovation and entrepreneurship and improving the inclusive green total factor productivity of cities. Third, considering the actual resource endowment of cities, fully exert the demonstrative and leading role of financial technology innovation pilot cities. Government departments should consider the differences in resource endowment among cities, providing necessary support in human, financial, and material resources to enable fintech and better achieve the goal of unleashing new dynamics of economic green development and inclusive growth through financial technology.

The main contributions of this paper are as follows. First, while existing research focuses mainly on the impact of financial technology on total factor productivity, green total factor productivity, or inclusive total factor productivity, this paper incorporates both green development and inclusive growth. It discusses the enhancement effect of financial technology on inclusive green total factor productivity from both theoretical and empirical perspectives, enriching the research on the economic consequences of fintech and supplementing the factors influencing inclusive green total factor productivity. Second, existing literature mainly analyzes the spatiotemporal evolution characteristics of inclusive green total factor productivity, with less focus on the specific pathways through which financial technology influences it. This paper investigates the mechanism of fintech's impact on inclusive green total factor productivity from multiple angles, such as green innovation, environmental investment, and entrepreneurial vitality, providing empirical evidence for fintech to break geographical limitations and achieve regional coordinated development and inclusive green growth objectives. Third, unlike existing literature that measures undesirable outputs from a single perspective, this paper introduces both environmental pollution and social injustice as undesirable outputs into the economic growth model, calculating inclusive green total factor productivity at the city level. This not only comprehensively reflects the characteristics of urban economic green development and inclusive growth but also provides an important reference for constructing a high-quality urban economic development indicator system.