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The impact of green finance on rural green development: Theory and evidence

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  • Zhang, Daopan
  • Zhao, Ningru
  • Yang, Zhihui

Abstract

This paper examines the relationship between green finance and rural green development by integrating a modified Harris-Todaro (H-T) model with empirical evidence from theoretically grounded survey data. We analyze two primary mechanisms through which green finance influences rural green development: pollution control and agricultural productivity enhancement. The theoretical model demonstrates that while green finance targeting environmental governance significantly reduces pollution, financing technological advancements in modern agriculture may inadvertently exacerbate pollution levels. Empirical findings corroborate these theoretical insights, confirming that green finance effectively promotes rural green development through both pollution mitigation and productivity gains. Importantly, our study highlights the dual role of green finance and provides policy recommendations, emphasizing the need to complement agricultural productivity-oriented financing with stringent environmental regulations to minimize unintended ecological consequences.

Suggested Citation

  • Zhang, Daopan & Zhao, Ningru & Yang, Zhihui, 2025. "The impact of green finance on rural green development: Theory and evidence," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325009079
    DOI: 10.1016/j.frl.2025.107648
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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