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Green finance and labor income share: evidence from China

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  • Luo, Mingjin
  • Wang, Shengquan

Abstract

Motivated by the global trend of green and low-carbon transformation and the dual-carbon goal, the development of China’s green finance has been expedited. Based on the data of Chinese listed companies, this paper examines the influence of green finance development on the labor share. We find that (1) The development of green finance exerts a negative effect on the overall labor income share of enterprises, primarily through accelerating the substitution of capital for labor and enhancing enterprise productivity. (2) The impact of green finance on the labor income share is more significant for heavily polluting enterprises, non-state-owned enterprises, and labor-intensive enterprises. (3) The strong bargaining power of workers within the firm and the acquisition of government subsidies effectively mitigate the negative impact of green finance on the labor income share. Nevertheless, the increase in labor costs intensifies the negative impact of green finance on the labor income share. (4) Regional-level analysis indicates that green finance has promoted the allocation of labor from the polluting sector to the clean sector. Green finance only has a reducing effect on the labor income share in heavily polluting sectors, and its overall impact on the regional labor income share is not remarkable.

Suggested Citation

  • Luo, Mingjin & Wang, Shengquan, 2026. "Green finance and labor income share: evidence from China," World Development, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:wdevel:v:203:y:2026:i:c:s0305750x26000604
    DOI: 10.1016/j.worlddev.2026.107371
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