Pub Date : 2026-01-13DOI: 10.1016/j.econmod.2026.107485
Geng Chen, Yikai Han
This paper investigates the relationship between Technological Peer Pressure (TPP) and inventor mobility. Using data on 398,734 inventors from 3078 Chinese listed firms over 2007–2021, we find that TPP significantly increases the likelihood of inventor mobility. This conclusion passes a series of robustness tests and mitigates endogeneity issues via the IV-2SLS and PSM-DID models. We identify three mechanisms driving this effect: heightened corporate earnings pressure, increased innovation bubbles, and diminished collaborative culture. This positive TPP-mobility link is weaker for inventors with more co-inventors or star inventors, for firms with more R&D alliances or less myopic management. Overall, our results highlight TPP's critical role in shaping inventor mobility, offering insights for firms to respond to technological competition in the product market.
{"title":"Technological peer pressure and inventor mobility: Evidence from China","authors":"Geng Chen, Yikai Han","doi":"10.1016/j.econmod.2026.107485","DOIUrl":"10.1016/j.econmod.2026.107485","url":null,"abstract":"<div><div>This paper investigates the relationship between Technological Peer Pressure (TPP) and inventor mobility. Using data on 398,734 inventors from 3078 Chinese listed firms over 2007–2021, we find that TPP significantly increases the likelihood of inventor mobility. This conclusion passes a series of robustness tests and mitigates endogeneity issues via the IV-2SLS and PSM-DID models. We identify three mechanisms driving this effect: heightened corporate earnings pressure, increased innovation bubbles, and diminished collaborative culture. This positive TPP-mobility link is weaker for inventors with more co-inventors or star inventors, for firms with more R&D alliances or less myopic management. Overall, our results highlight TPP's critical role in shaping inventor mobility, offering insights for firms to respond to technological competition in the product market.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107485"},"PeriodicalIF":4.7,"publicationDate":"2026-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979084","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-12DOI: 10.1016/j.econmod.2026.107481
Youzhi Xiao , Xin Liu
As rapid development of digital technologies, whether the Porter Hypothesis of environmental regulations satisfies, especially the strong version of the Porter Hypothesis, under the situations of the digital economy is a key issue to be considered. By utilizing the environmental administrative penalties (EAP) and the data from listed firms in China from 2010 to 2022, we find EAP significantly inhibit firm digital transformation, indicating the strong version of Porter Hypothesis does not satisfy. The plausible channels show the EAP dose not encourage the firms to conduct digital innovation. Moreover, we find the EAP promote firms investing in pro-environmental projects, make the firms pay more attention to the environmental issues, make the firms pay more attention to short-term interest and reduce the acquisition of external resources. Our results provide a new understanding of Porter Hypothesis and suggest that the digital technologies should be attached more importance to environmental sustainability.
{"title":"The environmental administrative penalties and firm digital transformation: A reexamination of Porter Hypothesis","authors":"Youzhi Xiao , Xin Liu","doi":"10.1016/j.econmod.2026.107481","DOIUrl":"10.1016/j.econmod.2026.107481","url":null,"abstract":"<div><div>As rapid development of digital technologies, whether the Porter Hypothesis of environmental regulations satisfies, especially the strong version of the Porter Hypothesis, under the situations of the digital economy is a key issue to be considered. By utilizing the environmental administrative penalties (EAP) and the data from listed firms in China from 2010 to 2022, we find EAP significantly inhibit firm digital transformation, indicating the strong version of Porter Hypothesis does not satisfy. The plausible channels show the EAP dose not encourage the firms to conduct digital innovation. Moreover, we find the EAP promote firms investing in pro-environmental projects, make the firms pay more attention to the environmental issues, make the firms pay more attention to short-term interest and reduce the acquisition of external resources. Our results provide a new understanding of Porter Hypothesis and suggest that the digital technologies should be attached more importance to environmental sustainability.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107481"},"PeriodicalIF":4.7,"publicationDate":"2026-01-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979086","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-09DOI: 10.1016/j.econmod.2026.107473
Moh’d Al-Azzam , David H. Bernstein , Christopher F. Parmeter
Cost efficiency in microfinance reveals whether microfinance institutions (MFIs) can serve the vulnerable sustainably or survive by relying on subsidies or passing inefficiencies to clients. As MFIs strive for sustainability, the role of gender — where women make up the majority of borrowers and more than one-third of MFIs’ employees — remains central to understanding efficiency. Using data from 1507 MFIs in 111 countries (2010–2018), we apply cutting-edge panel stochastic frontier models to assess global efficiency trends and the roles of women as borrowers and employees. We find that global efficiency declined, especially among larger MFIs, despite increasing returns to scale. MFIs that serve more women or hire more loan officers are associated with more inefficiencies. The effect of other women employees varies by role and profit orientation. Women in leadership improve efficiency in nonprofits but reduce it in for-profit MFIs, whereas female staff improve efficiency only in for-profit MFIs. These findings call for more targeted gender strategies to enhance inclusion and sustainability.
{"title":"Cost efficiency and gender diversity in microfinance: A stochastic frontier approach","authors":"Moh’d Al-Azzam , David H. Bernstein , Christopher F. Parmeter","doi":"10.1016/j.econmod.2026.107473","DOIUrl":"10.1016/j.econmod.2026.107473","url":null,"abstract":"<div><div>Cost efficiency in microfinance reveals whether microfinance institutions (MFIs) can serve the vulnerable sustainably or survive by relying on subsidies or passing inefficiencies to clients. As MFIs strive for sustainability, the role of gender — where women make up the majority of borrowers and more than one-third of MFIs’ employees — remains central to understanding efficiency. Using data from 1507 MFIs in 111 countries (2010–2018), we apply cutting-edge panel stochastic frontier models to assess global efficiency trends and the roles of women as borrowers and employees. We find that global efficiency declined, especially among larger MFIs, despite increasing returns to scale. MFIs that serve more women or hire more loan officers are associated with more inefficiencies. The effect of other women employees varies by role and profit orientation. Women in leadership improve efficiency in nonprofits but reduce it in for-profit MFIs, whereas female staff improve efficiency only in for-profit MFIs. These findings call for more targeted gender strategies to enhance inclusion and sustainability.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107473"},"PeriodicalIF":4.7,"publicationDate":"2026-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979088","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-09DOI: 10.1016/j.econmod.2025.107471
Chenzi Yang , Guang-Zhao Yang , Fernando Moreira , Thomas Welsh Archibald
This paper examines the impact of capital requirements on risk-taking in U.S. community banks. While existing literature highlights capital requirements’ influence on liquidity and credit risks, the differential impact across market power characteristics especially for smaller institutions remains unclear. Using data from 5702 U.S. community banks, we employ 2SLS-IV models to reveal an inverted U-shaped effect of capital requirements on liquidity risk and a U-shaped effect on credit risk. The impact of capital requirements diminishes as market power increases, particularly in banks with lower liquid assets, liabilities, and transaction deposits. The impact of Tier 1 and CET1 capital requirements exhibit similar patterns, while CCB requirements display an opposite trend. These findings offer new insights into financial risk management, highlighting the need for tailored regulatory approaches for community banks with low market power to enhance overall stability.
{"title":"Capital requirements and risk-taking in community banks: The role of market power","authors":"Chenzi Yang , Guang-Zhao Yang , Fernando Moreira , Thomas Welsh Archibald","doi":"10.1016/j.econmod.2025.107471","DOIUrl":"10.1016/j.econmod.2025.107471","url":null,"abstract":"<div><div>This paper examines the impact of capital requirements on risk-taking in U.S. community banks. While existing literature highlights capital requirements’ influence on liquidity and credit risks, the differential impact across market power characteristics especially for smaller institutions remains unclear. Using data from 5702 U.S. community banks, we employ 2SLS-IV models to reveal an inverted U-shaped effect of capital requirements on liquidity risk and a U-shaped effect on credit risk. The impact of capital requirements diminishes as market power increases, particularly in banks with lower liquid assets, liabilities, and transaction deposits. The impact of Tier 1 and CET1 capital requirements exhibit similar patterns, while CCB requirements display an opposite trend. These findings offer new insights into financial risk management, highlighting the need for tailored regulatory approaches for community banks with low market power to enhance overall stability.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107471"},"PeriodicalIF":4.7,"publicationDate":"2026-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979085","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.econmod.2025.107461
Fernando Barros Jr , Bruno R. Delalibera , Marcos J. Ribeiro , Marc Teignier
We examine the aggregate effects of greater integration of traditional and modern services into national supply chains. Using international input–output data, we document substantial cross-country variation in the composition of intermediate goods and identify distinct sectoral patterns. That is, modern services are more prevalent in advanced economies and are becoming increasingly central within production networks. To evaluate the implications, we construct a multisector general equilibrium model incorporating firm-level frictions in labor hiring and intermediate input purchases. These distortions weaken intersectoral linkages and distort production efficiency. Reducing them to US levels generates significant gains – aggregate output increases by 27% on average and by 50% in developing economies – while accelerating structural transformation toward services, particularly modern services, and enhancing their network centrality.
{"title":"Production networks and structural transformation","authors":"Fernando Barros Jr , Bruno R. Delalibera , Marcos J. Ribeiro , Marc Teignier","doi":"10.1016/j.econmod.2025.107461","DOIUrl":"10.1016/j.econmod.2025.107461","url":null,"abstract":"<div><div>We examine the aggregate effects of greater integration of traditional and modern services into national supply chains. Using international input–output data, we document substantial cross-country variation in the composition of intermediate goods and identify distinct sectoral patterns. That is, modern services are more prevalent in advanced economies and are becoming increasingly central within production networks. To evaluate the implications, we construct a multisector general equilibrium model incorporating firm-level frictions in labor hiring and intermediate input purchases. These distortions weaken intersectoral linkages and distort production efficiency. Reducing them to US levels generates significant gains – aggregate output increases by 27% on average and by 50% in developing economies – while accelerating structural transformation toward services, particularly modern services, and enhancing their network centrality.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107461"},"PeriodicalIF":4.7,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979087","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.econmod.2026.107479
Ailian Zhang, Yuxin Zhao, Bai Liu
Despite banks' central role as corporate creditors, existing literature offers limited evidence on their influence over firms' environmental behavior, particularly regarding bank fintech and corporate environmental information disclosure (EID). Based on Chinese listed firms from 2014 to 2023, this paper shows that bank fintech correlates with lower levels of EID. The underlying mechanism is that bank fintech alleviates financial mismatches, thereby reducing firms' incentives to signal environmental responsibility through disclosure. Corporate digital transformation attenuates this effect. The negative impact of bank fintech on EID is more pronounced for non–state-owned firms; firms facing lower financing constraints and with higher ESG scores; firms located in regions with weaker environmental regulation and financial development; and firms operating in highly competitive, non–heavily polluting industries. Importantly, bank fintech is found to improve firms’ actual environmental performance. These findings provide new insights into the determinants of EID and offer policy-relevant implications for environmental governance.
{"title":"Bank fintech and corporate environmental information disclosure: The role of financial mismatch","authors":"Ailian Zhang, Yuxin Zhao, Bai Liu","doi":"10.1016/j.econmod.2026.107479","DOIUrl":"10.1016/j.econmod.2026.107479","url":null,"abstract":"<div><div>Despite banks' central role as corporate creditors, existing literature offers limited evidence on their influence over firms' environmental behavior, particularly regarding bank fintech and corporate environmental information disclosure (EID). Based on Chinese listed firms from 2014 to 2023, this paper shows that bank fintech correlates with lower levels of EID. The underlying mechanism is that bank fintech alleviates financial mismatches, thereby reducing firms' incentives to signal environmental responsibility through disclosure. Corporate digital transformation attenuates this effect. The negative impact of bank fintech on EID is more pronounced for non–state-owned firms; firms facing lower financing constraints and with higher ESG scores; firms located in regions with weaker environmental regulation and financial development; and firms operating in highly competitive, non–heavily polluting industries. Importantly, bank fintech is found to improve firms’ actual environmental performance. These findings provide new insights into the determinants of EID and offer policy-relevant implications for environmental governance.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107479"},"PeriodicalIF":4.7,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979083","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.econmod.2026.107472
Zheng Wu, Alice Y. Ouyang
This study explores how local government debt expansion reshapes the financing behavior and costs of non-financial enterprises, and further motivates enterprises to engage in shadow banking activities. To clarify the underlying mechanism, we conduct an empirical analysis utilizing data on entrusted loans from Chinese non-financial A-share listed enterprises spanning the period 2007–2020. The results show that local government debt expansion tightens bank credit availability for the corporate sector, forcing financing-disadvantaged enterprises to seek alternative funding through entrusted loans. Concurrently, increased demand-driven loan returns attract financing-advantaged enterprises to participate in entrusted loan businesses, accelerating their financialization while transforming financing challenges for disadvantaged corporates from “difficult financing” to “expensive financing.” Our study highlights the critical need to optimize cross-sector credit allocation. Regulatory authorities should closely monitor how local government debt expansion promotes corporate reliance on shadow banking and remain vigilant against risk transmission from the government sector to the corporate sector.
{"title":"Local government debt and shadow banking of non-financial enterprises: Evidence from China","authors":"Zheng Wu, Alice Y. Ouyang","doi":"10.1016/j.econmod.2026.107472","DOIUrl":"10.1016/j.econmod.2026.107472","url":null,"abstract":"<div><div>This study explores how local government debt expansion reshapes the financing behavior and costs of non-financial enterprises, and further motivates enterprises to engage in shadow banking activities. To clarify the underlying mechanism, we conduct an empirical analysis utilizing data on entrusted loans from Chinese non-financial A-share listed enterprises spanning the period 2007–2020. The results show that local government debt expansion tightens bank credit availability for the corporate sector, forcing financing-disadvantaged enterprises to seek alternative funding through entrusted loans. Concurrently, increased demand-driven loan returns attract financing-advantaged enterprises to participate in entrusted loan businesses, accelerating their financialization while transforming financing challenges for disadvantaged corporates from “difficult financing” to “expensive financing.” Our study highlights the critical need to optimize cross-sector credit allocation. Regulatory authorities should closely monitor how local government debt expansion promotes corporate reliance on shadow banking and remain vigilant against risk transmission from the government sector to the corporate sector.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107472"},"PeriodicalIF":4.7,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145940104","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.econmod.2026.107477
Veronika Nálepová , Marek Lampart
This study develops a dynamic Cournot model to examine whether profit taxation can stabilise oligopolistic markets hit by demand shocks. The tax rate is updated each period by a simple welfare rule, allowing fiscal policy to respond automatically to changing market conditions. The analysis connects the effectiveness with which taxes influence firms’ decision-making (the transmission strength) to market stability. Simulations and chaos analysis show that when the tax signal is strong, firms adjust smoothly, volatility falls and competition is preserved. In contrast, when transmission is weak, feedback effects magnify shocks, increasing exit risk and market concentration. Moderate shocks are absorbed through temporary tax changes, while stronger demand shocks in the model mainly threaten the high-cost firm. Overall, transparent and predictable profit taxation serves as a practical stabiliser in concentrated industries, limiting volatility without ad hoc measures and providing a scalable framework for future fiscal design.
{"title":"Rule-based profit taxation in dynamic Cournot oligopoly: Transmission, stability and welfare","authors":"Veronika Nálepová , Marek Lampart","doi":"10.1016/j.econmod.2026.107477","DOIUrl":"10.1016/j.econmod.2026.107477","url":null,"abstract":"<div><div>This study develops a dynamic Cournot model to examine whether profit taxation can stabilise oligopolistic markets hit by demand shocks. The tax rate is updated each period by a simple welfare rule, allowing fiscal policy to respond automatically to changing market conditions. The analysis connects the effectiveness with which taxes influence firms’ decision-making (the transmission strength) to market stability. Simulations and chaos analysis show that when the tax signal is strong, firms adjust smoothly, volatility falls and competition is preserved. In contrast, when transmission is weak, feedback effects magnify shocks, increasing exit risk and market concentration. Moderate shocks are absorbed through temporary tax changes, while stronger demand shocks in the model mainly threaten the high-cost firm. Overall, transparent and predictable profit taxation serves as a practical stabiliser in concentrated industries, limiting volatility without ad hoc measures and providing a scalable framework for future fiscal design.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107477"},"PeriodicalIF":4.7,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145940105","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-06DOI: 10.1016/j.econmod.2025.107463
Abhay Pratap Raghuvanshi , Wasim Ahmad
How do firm characteristics shape the real effects of monetary policy in emerging markets, and which firms bear the highest cost of tightening? Using firm-level data for India from 2011 to 2022, this paper examines heterogeneity in monetary transmission, focusing on balance-sheet strength, market power, and ownership. Using a panel local-projection framework, we estimate the dynamic response of firm sales to monetary policy shocks. Tightening shocks lead to larger sales contractions among firms with higher leverage, weaker liquidity and profitability, and smaller asset bases. Policy effects are also asymmetric: financially fragile firms suffer a deeper sales reduction during the expansion phase of the business cycle than during the contraction phase. The findings suggest that monetary transmission in emerging markets operates through a balance-sheet channel, where credit frictions amplify the impact of policy shocks, rendering firm financial resilience crucial to the effectiveness of transmission.
{"title":"Fragile firms, fierce shocks: The asymmetric firm-level transmission of monetary policy in India","authors":"Abhay Pratap Raghuvanshi , Wasim Ahmad","doi":"10.1016/j.econmod.2025.107463","DOIUrl":"10.1016/j.econmod.2025.107463","url":null,"abstract":"<div><div>How do firm characteristics shape the real effects of monetary policy in emerging markets, and which firms bear the highest cost of tightening? Using firm-level data for India from 2011 to 2022, this paper examines heterogeneity in monetary transmission, focusing on balance-sheet strength, market power, and ownership. Using a panel local-projection framework, we estimate the dynamic response of firm sales to monetary policy shocks. Tightening shocks lead to larger sales contractions among firms with higher leverage, weaker liquidity and profitability, and smaller asset bases. Policy effects are also asymmetric: financially fragile firms suffer a deeper sales reduction during the expansion phase of the business cycle than during the contraction phase. The findings suggest that monetary transmission in emerging markets operates through a balance-sheet channel, where credit frictions amplify the impact of policy shocks, rendering firm financial resilience crucial to the effectiveness of transmission.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107463"},"PeriodicalIF":4.7,"publicationDate":"2026-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145940103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-06DOI: 10.1016/j.econmod.2026.107476
Minzhi Wang , Xinxin Guo , Yu Gu
Exploiting China's green credit policy (GCP) as a quasi-natural experiment, this paper examines the impact of green credit on polluting firm dynamics using a difference-in-differences method. We show that the GCP reduces the number of firm entries by 10.1 % and increases the number of firm exits by 9.1 % in polluting industries. Our mechanism analyses further corroborate that the GCP significantly intensifies financing constraints for polluting firms, resulting in increased entry barriers and operational costs. Heterogeneous tests show that the effect is more pronounced in cities with a higher level of marketization or stricter environmental regulation and industries with higher market competition or larger irreversible investments. Additionally, we find that the GCP leads to better-quality entrants with larger scale, higher total factor productivity, and lower pollution discharge intensity. These results imply that the GCP promotes efficient resource allocation, manifested in the transfer of production factors to more productive and cleaner firms.
{"title":"Greening through credit: Green credit and polluting firm dynamics in China","authors":"Minzhi Wang , Xinxin Guo , Yu Gu","doi":"10.1016/j.econmod.2026.107476","DOIUrl":"10.1016/j.econmod.2026.107476","url":null,"abstract":"<div><div>Exploiting China's green credit policy (GCP) as a quasi-natural experiment, this paper examines the impact of green credit on polluting firm dynamics using a difference-in-differences method. We show that the GCP reduces the number of firm entries by 10.1 % and increases the number of firm exits by 9.1 % in polluting industries. Our mechanism analyses further corroborate that the GCP significantly intensifies financing constraints for polluting firms, resulting in increased entry barriers and operational costs. Heterogeneous tests show that the effect is more pronounced in cities with a higher level of marketization or stricter environmental regulation and industries with higher market competition or larger irreversible investments. Additionally, we find that the GCP leads to better-quality entrants with larger scale, higher total factor productivity, and lower pollution discharge intensity. These results imply that the GCP promotes efficient resource allocation, manifested in the transfer of production factors to more productive and cleaner firms.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"156 ","pages":"Article 107476"},"PeriodicalIF":4.7,"publicationDate":"2026-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145940102","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}