Fiscal science and technology expenditure, industrial agglomeration and green total factor productivity: Experiences from China

• The Fiscal Science and Technology Expenditure (FSTE) and industrial agglomeration are conducive to Green Total Factor Productivity (GTFP). • FSTE can indirectly affect GTFP through industrial agglomeration. • When there are differences in economic development and regional scale, there are significant differences in the effects of FSTE and industrial agglomeration on GTFP. • FSTE inhibits industrial agglomeration in regions with high levels of economic development, but the mediating effect of industrial agglomeration on GTFP is positive only in regions with low and medium levels of development. The Fiscal Science and Technology Expenditure (FSTE) serves as a crucial policy instrument for promoting green technology innovation, with demonstrable effects on industrial agglomeration and Green Total Factor Productivity (GTFP). This paper systematically describes the relationship between FSTE, industrial agglomeration and GTFP, and then empirically analyses the mediating role among the three, combined with panel data from 288 Chinese cities. Overall, FSTE and industrial agglomeration are conducive to GTFP, and FSTE can indirectly affect GTFP through industrial agglomeration. When there are differences in economic development and regional scale, there are significant differences in the effects of FSTE and industrial agglomeration on GTFP. FSTE inhibits industrial agglomeration in regions with high levels of economic development, but the mediating effect of industrial agglomeration on GTFP is prominent in regions with low and medium levels of development. For large cities, the effect of FSTE on industrial agglomeration is not significant and industrial agglomeration does not affect GTFP, but the mediating effect about industrial agglomeration is significant in small and medium-sized cities. In eastern China, FSTE has a hindering effect on GTFP through industrial agglomeration, but it has a promoting effect in central and western China. This paper helps to understand the role of science and technology spending on green production as well as agglomeration of enterprises.