Green credit and firms’ span of global production stages

Abstract

This paper investigates the impact of the green credit policy on firms' span of global production stages. We leverage a comprehensive dataset, including customs trade data, industrial firm data, and Chinese Input-Output tables, and employ a difference-in-differences design that accounts for the pollution spillover effect within the production network. Our findings indicate that firms in pollution-intensive industries tend to move downstream in the global production line, accompanied by an expansion in the span of production stages. We present evidence that the broader range of production stages can be attributed to increased firm productivity. The effect is more pronounced for hybrid processing firms, private firms, foreign firms, and those in industries that rely on external finance dependence. Our study provides valuable insights into the impact of green credit policies and sheds light on firms' strategies in the context of green development.