Toward Sustainable Development: The Impact of Green Fiscal Policy on Green Total Factor Productivity

Peikai Luo, Chenchu Zhang and Bohui Cheng ()
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Peikai Luo: School of Government, University of International Business and Economics, Beijing 100029, China
Chenchu Zhang: School of Government, University of International Business and Economics, Beijing 100029, China
Bohui Cheng: School of Government, University of International Business and Economics, Beijing 100029, China

Sustainability, 2025, vol. 17, issue 3, 1-21

Abstract: Green fiscal policy draws worldwide attention from policymakers as a potential mechanism that contributes to sustainable development. However, although many studies have discussed the economic consequences of green fiscal policy, there is still a lack of studies that systematically quantify the productivity impacts of green fiscal policy. Therefore, to fill this gap, China’s Energy Conservation and Emission Reduction Fiscal Policy Pilot (ECER) and difference-in-differences (DID) identification method were chosen to explore the impact of green fiscal policy on green total factor productivity (GTFP). We find that ECER significantly enhances urban GTFP, and it holds after a series of robustness tests. Moreover, we explore the mediating mechanisms that may explain this effect: government environmental regulation, green technology innovation, and industrial structure optimization. Further analysis shows that the positive effect of ECER is more significant when (1) government transparency is high; (2) government financial autonomy is high; (3) government digital transformation is high; (4) the city’s resource endowment is high; and (5) the city’s economic development level is high. Overall, our study provides new insights into the economic consequences of green fiscal policy.

Keywords: green fiscal policy; urban green total factor productivity; energy conservation and emission reduction; quasi-natural experiments (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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