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How does fiscal policy affect green innovation development? Evidence from 30 provinces in China

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  • Zhao, Ran
  • Zhao, Yuhan
  • He, Pinglin

Abstract

Green innovation development mode has emerged as a critical driver of high-quality development in China. Utilizing panel data from 30 Chinese provinces (2007–2023), this study investigates the role of fiscal policy on green innovation development (GID) with mediation and conditional process models. Our findings indicate that fiscal science and technology (S&T) expenditure significantly promotes GID, and this effect is most pronounced in regions with a robust digital economy policy, stronger intellectual property rights (IPR) protection, a talent-driven economy, and the central provinces. Meanwhile, Green technology innovation has a primary mediation effect, while green tax negatively moderates the mediating role of green technology innovation between fiscal S&T expenditure and GID. Furthermore, the threshold effect reveals that fiscal pressure can enhance the main relationship. Potential reasons are that the central government's green development orientation forces high-pressure local governments to generate new economic growth. This study contributes a deeper understanding of the dynamic interactions between financial resources, government behaviour and green innovation, providing valuable insights for optimizing policy frameworks. It also offers some references for other developing countries.

Suggested Citation

  • Zhao, Ran & Zhao, Yuhan & He, Pinglin, 2025. "How does fiscal policy affect green innovation development? Evidence from 30 provinces in China," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825000910
    DOI: 10.1016/j.asieco.2025.101967
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