Digital finance and green economic efficiency: an application of regression kink model

As digital finance expands rapidly in emerging economies, understanding its nonlinear impact on green economic efficiency is critical for sustainable development. This article investigates this relationship in China by employing a regression kink model with an unknown threshold. We identify a structural breakpoint that previous approaches failed to capture. The kink specification imposes continuity while allowing asymmetric slope changes – better reflecting the gradual evolution of digital infrastructure and institutions. We find a V-shaped pattern: below a threshold (DF index ≈ 52.90), digital finance suppresses green efficiency; above it, the effect turns positive. These findings provide actionable guidance for China’s Dual Carbon goals and offer a benchmark for other emerging economies pursuing green transformations.