Does green finance foster common prosperity? A study based on China's provincial panel data

In the context of China’s combined strategy of advancing common prosperity and fulfilling the “dual carbon” goals, this study explores whether and how green finance facilitates common prosperity. We constructed a comprehensive common prosperity evaluation index that covers the development, sharing, and sustainability dimensions, as well as a multidimensional green finance development index. Using panel data from 31 Chinese provinces during 2014-2023, empirical tests were conducted via two-way fixed effects models. The results show that green finance significantly enhances common prosperity, a conclusion that remains robust across various sensitivity checks. Industrial structure upgrading is a crucial transmission channel, with green finance stimulates structural transformation toward advanced industries, thereby fostering shared prosperity. Heterogeneity analysis reveals that the positive effect of green finance on common prosperity works better in central China and in regions with high digital development. This study establishes an empirical connection between financial instruments and social objectives and provides policymakers with evidence supporting differentiated regional strategies.