Digital finance and innovation inequality: evidence from green technological innovation in China

Green technological innovation is an overarching approach to tackling environmental pollution, and mitigating the inequality in green technological innovation between regions can contribute to environmental equity. This study measures the inequality in green technological innovation via an index and examines the influence of digital finance on that inequality using data from 285 cities in China from 2011 to 2018. The results are as follows: (1) Digital financial development alleviates the inequality in green technological innovation, and the greater the inequality is, the stronger the effect of digital finance. The development of digital finance can help regions lagging behind in terms of green technology to catch up. (2) When the financial supervision and environmental restrictions within a region are strict, the development of digital finance is more effective at reducing the inequality in green technological innovation; a higher capacity for governance in the local government and a smaller digital divide strengthen the positive effects of digital finance. (3) The development of digital finance alleviates interregional inequality in green credit, reduces market segmentation, and increases spending on environmental protection, thus narrowing the gap in the capacity for green innovation between regions. These findings not only enrich the literature on digital finance and green technological innovation but also serve as a reference for governmental departments as they optimize their strategy for developing digital finance and coordinating green development across regions.