Green Finance and Green Total Factor Productivity: Impact Mechanisms, Threshold Characteristics, and Spatial Effects

Investing in green total factor productivity is the key to realizing high-quality economic development in China. Can green finance effectively enhance green total factor productivity and promote high-quality economic development? Based on the panel data of 30 provinces in China from 2010 to 2020, this study empirically examines the direct, indirect, nonlinear, and spatial effects of green finance on green total factor productivity by using the two-way fixed effects model, the mechanism test model, the threshold effect model, and the dynamic spatial Durbin model. The results show that (1) green finance can directly promote green total factor productivity, specifically a 1% increase in the standard deviation of green finance increases green total factor productivity by 2.98% relative to the mean; (2) substantial green technological innovation, industrial structure supererogation, and industrial structure rationalization are important mechanisms for green finance to enhance green total factor productivity; (3) when the economic development level and urbanization level are used as threshold variables, the impact of green finance on green total factor productivity has a nonlinear characteristic of increasing “marginal effect”; (4) there is a significant positive spatial spillover effect of green finance on green total factor productivity, which is dominated by the short-run spatial effect; (5) the effects of green finance on the enhancement of green total factor productivity are more obvious in the eastern regions (2.0580), the high marketization level regions (0.7866), and the weak environmental protection enforcement strength regions (0.7699). This study reveals the internal logic of the role of green finance in green total factor productivity growth and provides empirical support for green finance to promote high-quality economic development. Therefore, local governments should actively promote the development of green finance, and at the same time take into account the differences in the economic development stage and urbanization process of each region and formulate differentiated green finance development policies.