Non-Linear Impacts and Spatial Spillover of Digital Finance on Green Total Factor Productivity: An Empirical Study of Smart Cities in China

Smart cities are important digital economy vehicles that can fully exploit the green attributes and spatial penetration of digital finance. Using panel data for 100 cities selected as pilot smart cities in China from 2011 to 2019, this paper applies a spatial econometric model to analyze the non-linear impacts of digital finance on GTFP and its spatial spillovers. Furthermore, it utilizes mediation models to study their transmission mechanisms. The results show that digital finance first inhibits and then promotes GTFP, with spatial spillovers in four dimensions: geography, information, technology, and human capital. Its mediating mechanisms are innovation effects, structural effects, and scale effects. The statistical significance of the U-shaped relationship is regionally heterogeneous, according to different levels of human capital, informatization, urbanization, and financial marketization. Based on digital finance's U-shaped and heterogeneous impacts on GTFP, policy recommendations are to adopt differentiated development strategies according to specific levels of digital finance and underlying conditions in smart cities. Stimulating the innovation and structural effects and suppressing the scale effects will help digital finance breakthrough inflection points, and will positively promote GTFP. It is also necessary to encourage inter-regional cooperation among smart cities to fully release spatial spillover dividends through technology sharing, information transfer, and talent exchange to promote the linked improvement of GTFP.