Creation or destruction? Green finance and employment in heavy polluting firms - evidence from China’s green finance reform and innovation pilot zone

We design a production function for heavy polluters, consider China’s Green Finance Reform and Innovation Pilot Zone (GFRI) policy as a quasi-natural experiment, and employ difference-in-differences-in-differences (DDD) model. Our empirical results show that green finance usually reduces the employment of heavily polluting enterprises. It is verified that green finance affects the employment of heavy polluters through scale effect, capital substitution effect and technology substitution effect. This effect is particularly evident in labor-intensive industries, state-owned enterprises and low-skilled workers, but increases the employment of high-skilled workers and promote the entry of green firms in cities. This paper reveals the potential impact of green finance on the employment of heavy polluting firms, and discovers that this policy has facilitated the transfer of labor force to the fields of research and technical services, optimizing the employment structure and providing important empirical references for the smooth transition of China’s economic structure and upgrading.