How Does Fiscal Vertical Imbalance Affect Regional Green Technology Innovation in China—The Moderating Role of Financial Decentralization and Fiscal Transparency

Abstract

Green technology innovation (GTI) is crucial for sustainable economic development and achieving “peak carbon” and “carbon neutrality” goals. While fiscal vertical imbalance (FVI) may exert an inhibiting effect on regional GTI, the existing literature has paid insufficient attention to investigating the underlying mechanisms and potential mitigation strategies for such impacts. Using provincial data from China (2005–2019), this study explores the impact of FVI on GTI through theoretical analysis and empirical testing. The results indicate that FVI significantly inhibits GTI, as validated by the dynamic system Generalized Method of Moments (GMM) and spatial Durbin model analyses. Mechanistically, FVI hinders GTI by altering government innovation preferences and reducing investments in environmental pollution control. Moreover, financial decentralization and fiscal transparency positively moderate this relationship, with nonlinear moderating effects. These findings suggest that enhancing regional financial decentralization and fiscal transparency can mitigate the negative effects of FVI on GTI, offering practical insights for harmonizing fiscal policies and green economic transitions.