The impact of green finance reform on labour income share in the manufacturing sector

Based on data from Chinese manufacturing listed firms between 2013 and 2023, this paper employs a staggered difference-in-differences (DID) model to examine the impact of the Green Finance Reform and Innovation Pilot Zones on firms’ labour income share. The results show that this policy significantly promotes the increase of labour income share in manufacturing enterprises, and the findings are robust to multiple validity checks. The underlying mechanisms are reflected in the upgrading of human capital structure, the reduction of capital deepening, and the improvement of green innovation capacity. Moreover, the promotion effect is more pronounced among firms with high financing constraints, low labour productivity, low market concentration, and those that are capital-intensive. The findings provide important implications for advancing green finance while improving firms’ internal income distribution, indicating that green finance reform can help promote a more balanced allocation between capital and labour during the green transition.