Hostname: page-component-745bb68f8f-b95js Total loading time: 0 Render date: 2025-01-09T12:27:29.929Z Has data issue: false hasContentIssue false
  • English
  • Français

Financial development and environmental performance: evidence from China*

Published online by Cambridge University Press:  02 November 2010

KARL YUXIANG  and
ZHONGCHANG CHEN
KARL YUXIANG
Affiliation:
School of Public Administration, School of Public Administration, and School of Economics and Business Administration, Chongqing University and Chongqing College of Public Administration, Tian Xia Cheng 5-7-2, Panxi 6th Road, Jiangbei District, Chongqing 400020, China. Tel: +861-8702 32-3992. Email: [email protected], [email protected]
ZHONGCHANG CHEN
Affiliation:
School of Public Administration, Chongqing University, Sha Zheng Street 174, Shapingba District, Chongqing 400044, China
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper extends the debate on the environmental performance of developing countries by focusing on a new factor. Theoretically, financial development has capitalization, technology, income, and regulation effects on the environment. Using the provincial panel data of China, the econometric analysis provides some evidence of a linkage between financial development and industrial pollution discharges. In recent years, the environmental performance of China has been significantly improved by financial development and some environmental protection schemes. This relationship offers new implications for policy makers in developing countries.

Type
Research Article
Information
Environment and Development Economics , Volume 16 , Issue 1 , February 2011 , pp. 93 - 111
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Arellano, M. and Bond, S.R. (1991), ‘Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations’, Review of Economic Studies 58: 277–297.CrossRefGoogle Scholar
Athey, M.J. and Laumas, P.S. (1994), ‘Internal funds and corporate investment in India’, Journal of Development Economics 45: 287–303.CrossRefGoogle Scholar
Baltagi, B.H., Demetriades, P.O. and Law, S.H. (2009), ‘Financial development and openness: evidence from panel data’, Journal of Development Economics 89: 285–296.CrossRefGoogle Scholar
Beck, T. and Demirgüc-Kunt, A. (2006), ‘Small and medium-size enterprises: access to finance as a growth constraint’, Journal of Banking & Finance 30: 2931–2943.CrossRefGoogle Scholar
Blundell, R. and Bond, S. (1998), ‘Initial conditions and moment restrictions in dynamic panel data models’, Journal of Econometrics 87: 115–143.CrossRefGoogle Scholar
Bond, S. (2002), ‘Dynamic panel data models: a guide to micro data methods and practice’, Portuguese Economic Journal 1: 141–162.CrossRefGoogle Scholar
Brännlund, R., Ghalwash, T., and Nordström, J. (2007), ‘Increased energy efficiency and the rebound effect: effects on consumption and emissions’, Energy Economics 29: 1–17.CrossRefGoogle Scholar
Chang, Y., Hans, M.S., and Haakon, V. (2001), ‘The environmental cost of water pollution in Chongqing, China’, Environment and Development Economics 6: 313–333.Google Scholar
China Finance Association (2008), China Finance Yearbook, Beijing: China Finance Press.Google Scholar
Chow, C.K.W. and Fung, M.K.Y. (2000), ‘Small businesses and liquidity constraints in financing business investment: evidence from Shanghai's manufacturing sector’, Journal of Business Venturing 15: 363–383.CrossRefGoogle Scholar
Christopoulos, D.K. and Tsionas, E.G. (2004), ‘Financial development and economic growth: evidence from panel unit root and cointegration tests’, Journal of Development Economics 73: 55–74.CrossRefGoogle Scholar
Cole, M.A. (2007), ‘Corruption, income and the environment: an empirical analysis’, Ecological Economics 62: 637–647.CrossRefGoogle Scholar
Cole, M.A., Elliott, R.J.R., and Shimamoto, K. (2005), ‘Industrial characteristics, environmental regulations and air pollution: an analysis of the UK manufacturing sector’, Journal of Environmental Economics and Management 50: 121–143.CrossRefGoogle Scholar
Cole, M.A., Elliott, R.J.R., and Strobl, E. (2008), ‘The environmental performance of firms: the role of foreign ownership, training, and experience’, Ecological Economics 65: 538–546.CrossRefGoogle Scholar
Cull, R. and Xu, L.C. (2000), ‘Bureaucrats, state banks, and the efficiency of credit allocation: the experience of Chinese state-owned enterprises’, Journal of Comparative Economics 28: 1–31.CrossRefGoogle Scholar
Cull, R. and Xu, L.C. (2003), ‘Who gets credit? The behavior of bureaucrats and state banks in allocating credit to Chinese state-owned enterprises’, Journal of Development Economics 71: 533–559.CrossRefGoogle Scholar
Cull, R. and Xu, L.C. (2005), ‘Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms’, Journal of Financial Economics 77: 117–146.CrossRefGoogle Scholar
Eskeland, G.S. and Harrison, A.E. (2003), ‘Moving to greener pasture? Multinationals and the pollution haven hypothesis’, Journal of Development Economics 70: 1–23.CrossRefGoogle Scholar
Giuliano, P. and Ruiz-Arranz, M. (2009), ‘Remittances, financial development, and growth’, Journal of Development Economics 90: 144–152.CrossRefGoogle Scholar
Grossman, G.M. and Krueger, A.B. (1995), ‘Economic growth and the environment’, Quarterly Journal of Economics 110: 352–377.Google Scholar
Hansen, B.E. (1999), ‘Threshold effects in non-dynamic panels: estimation, testing, and inference’, Journal of Econometrics 93: 345–368.CrossRefGoogle Scholar
Hansen, L.P. (1982), ‘Large sample properties of generalized method of moments estimators’, Econometrica 50: 1029–1054.CrossRefGoogle Scholar
Hasan, I., Wachtel, P., and Zhou, M. (2009), ‘Institutional development, financial deepening and economic growth: evidence from China’, Journal of Banking & Finance 33: 157–170.CrossRefGoogle Scholar
He, J. (2006), ‘Pollution haven hypothesis and environmental impacts of foreign direct investment: the case of industrial emission of sulfur dioxide (SO2) in Chinese provinces’, Ecological Economics 60: 228–245.CrossRefGoogle Scholar
Huang, B.N., Hwang, M.J., and Yang, C.W. (2008), ‘Causal relationship between energy consumption and GDP growth revisited: a dynamic panel data approach’, Ecological Economics 67: 41–54.CrossRefGoogle Scholar
Karen, F.V., Gary, H.J., Ma, J., and Xu, J. (2006), ‘Technology development and energy productivity in China’, Energy Economics 28: 690–705.Google Scholar
King, R.G. and Levine, R. (1993a), ‘Finance and growth: Schumpeter might be right’, Quarterly Journal of Economics 108: 717–737.CrossRefGoogle Scholar
King, R.G. and Levine, R. (1993b), ‘Finance, entrepreneurship, and growth: theory and evidence’, Journal of Monetary Economics 32: 513–542.CrossRefGoogle Scholar
Levine, R. and Zervos, S. (1998), ‘Stock markets, banks and economic growth’, American Economic Review 88: 537–558.Google Scholar
Liang, Q. and Teng, J. (2006), ‘Financial development and economic growth: evidence from China’, China Economic Review 17: 395–411.CrossRefGoogle Scholar
Lopez, R. and Mitra, S. (2000), ‘Corruption, pollution and the environmental Kuznets curve’, Journal of Environmental Economics and Management 40: 137–150.CrossRefGoogle Scholar
Lu, S.F. and Yao, Y. (2009), ‘The effectiveness of law, financial development, and economic growth in an economy of financial repression: evidence from China’, World Development 37: 763–777.Google Scholar
Lundgren, T. (2003), ‘A real options approach to abatement investments and green goodwill’, Environmental and Resource Economics 25: 17–31.CrossRefGoogle Scholar
Ma, C. and Stern, D.I. (2008), ‘China's changing energy intensity trend: a decomposition analysis’, Energy Economics 30: 1037–1053.CrossRefGoogle Scholar
Ma, H., Oxley, L., Gibson, J., and Kim, B. (2008), ‘China's energy economy: technical change, factor demand and interfactor/interfuel substitution’, Energy Economics 30: 2167–2183.CrossRefGoogle Scholar
McKinnon, R.I. (1973), Money and Capital in Economic Development, Washington, DC: Brookings Institution, Inc.Google Scholar
McKinnon, R.I. (1994), ‘Financial growth and macroeconomic stability in China, 1978–1992: implications for Russia and other transitional economies’, Journal of Comparative Economics 18: 438–469.CrossRefGoogle Scholar
Odedokun, M.O. (1996), ‘Alternative econometric approaches for analysing the role of the financial sector in economic growth: time-series evidence from LDCs’, Journal of Development Economics 50: 119–146.CrossRefGoogle Scholar
OECD (2007), Environmental Performance Reviews: China, Paris: OECD Press.Google Scholar
Pargal, S. and Wheeler, D. (1996), ‘Informal regulation of industrial pollution in developing countries: evidence from Indonesia’, Journal of Political Economy 104: 1314–1327.CrossRefGoogle Scholar
Perotti, E.C. (1993), ‘Bank lending in transition economies’, Journal of Banking & Finance 17: 1021–1032.CrossRefGoogle Scholar
Perotti, E.C. and Vesnaver, L. (2004), ‘Enterprise finance and investment in listed Hungarian firms’, Journal of Comparative Economics 32: 73–87.CrossRefGoogle Scholar
Sanstad, A.H., Roy, J., and Sathaye, J.A. (2006), ‘Estimating energy-augmenting technological change in developing country industries’, Energy Economics 28: 720–729.CrossRefGoogle Scholar
Shaw, E.S. (1973), Financial Deepening in Economic Development, New York: Oxford University Press.Google Scholar
Suri, V. and Chapman, D. (1998), ‘Economic growth, trade and energy: implications for the environmental Kuznets curve’, Ecological Economics 25: 195–208.CrossRefGoogle Scholar
Switzer, L. (1984), ‘The determination of industrial R&D: a funds flow simultaneous equation approach’, Review of Economics & Statistics 66: 163–168.CrossRefGoogle Scholar
Tamazian, A., Chousa, J.P., and Vadlamannati, K.C. (2009), ‘Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries’, Energy Policy 37: 246–253.CrossRefGoogle Scholar
Tsuzuki, Y. (2008), ‘Relationships between water pollutant discharges per capita (PDCs) and indicators of economic level, water supply and sanitation in developing countries’, Ecological Economics 68: 273–287.CrossRefGoogle Scholar
Yuxiang, K. and Chen, Z. (2010a), ‘Government expenditure and energy intensity in China’, Energy Policy 38: 691–694.CrossRefGoogle Scholar
Yuxiang, K. and Chen, Z. (2010b), ‘Resource abundance and financial development: evidence from China’, Resources Policy, doi:10.1016/j.resourpol.2010.05.002.CrossRefGoogle Scholar
Zhang, K.H. and Song, S. (2000), ‘Promoting exports: the role of inward FDI in China’, China Economic Review 11: 385–396.CrossRefGoogle Scholar