The local government fiscal pressure's effect on green total factor productivity: Exploring mechanisms from the perspective of government behavior

Song Nie, Gang Zeng, Hongying Zhang and Jianwen Ji

International Review of Economics & Finance, 2024, vol. 96, issue PC

Abstract: Local government fiscal pressure can change government behavior, which in turn affects corporate performance to a certain extent. However, the research on how fiscal pressure affect green economy is scarce. We adopt the city-level green total factor productivity (GTFP) index to measure the green economy in China and verifies fiscal pressure's negative effect on GTFP from the new perspective of government behavior. We find that fiscal pressure reduces GTFP by leading to short-sighted government actions which inhibit the industrial upgrading and reduce green innovation capacity. In addition, the negative impact varies heterogeneously with different economic development and geographic location. Furthermore, green finance, slight tax burden, and fiscal decentralization can alleviate the negative impact of fiscal pressure on GTFP. This study not only provides guidance on fiscal governance, but also provides a reference for the synergistic promotion of environmental governance and economic development in developing countries.

Keywords: Fiscal pressure; Green total factor productivity; Government behavior; Industrial upgrading; Green innovation (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pc:s1059056024006944

DOI: 10.1016/j.iref.2024.103702

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