Financial Geographical Structure and the Gap of Green Development: Evidence from Chinese Cities

Abstract

In the context of common prosperity, it is of great significance to explore the influence and mechanism of financial development on the gap of green development. This study takes 250 prefecture-level cities in China from 2003 to 2019 as the research object and empirically tests the influence of financial development on the gap of green development by using the super-efficiency SBM model, the two-way fixed effect model, and the mediating effect model. It is found that local financial effect can significantly narrow the gap of green development, while financial spillover effect of the central city can widen the gap of green development. The mechanism analysis shows that enhancing the advancement of human capital helps to optimize the utilization efficiency of financial resources outside the city and thus narrows the gap of green development. Local financial effect narrows the gap by the optimization of industrial structure, the improvement technological innovation, and the decrease of resource dependence, while financial spillover effect narrows the gap only by the optimization of industrial structure. The heterogeneity analysis demonstrates that local financial effect significantly narrows the gap of green development in cities that are 100-200 KM away from the central city in the central region, while financial spillover effect significantly enlarges the gap of green development in cities that are 100-300 KM away from the central city in the western region. The research in this paper facilitates the understanding of the influence of financial development on the gap of green development and puts forward relevant policy suggestions.