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Government subsidies, environmental costs, and green innovation

Author

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  • Ma, Cuijun
  • Peng, Donghui

Abstract

Utilizing a dataset of Chinese A-share listed firms spanning 2009–2023, this study investigates the interplay between government subsidies, environmental expenditures, and firms' green technology innovation, elucidating the underlying transmission mechanisms. Empirical analysis results clearly indicate that government financial incentives exert a favorable influence on fostering firms' green technological advancements, while environmental expenditures also act as a catalyst for enhancing such innovations. Moreover, government subsidies serve as a crucial moderating factor in the interplay between environmental costs and green technological innovation. Additionally, the impact of government subsidies on green technology innovation exhibits significant disparities between high-pollution enterprises and their non-high-pollution counterparts. Similarly, the influence of environmental costs on green technology innovation also shows significant heterogeneity between these two categories of companies.

Suggested Citation

  • Ma, Cuijun & Peng, Donghui, 2025. "Government subsidies, environmental costs, and green innovation," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025004009
    DOI: 10.1016/j.iref.2025.104237
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