Green finance can blunt the resource curse in China’s mining cities, study finds

Resource-dependent cities face a stubborn dilemma: the industries that anchor their economies also drag down their environmental performance. A new study of 113 Chinese prefecture-level resource-based cities suggests a way out of that trap. Using a balanced panel covering 2007 to 2022, researchers report that resource dependence significantly undermines green development efficiency, but that the damage shrinks as local green finance deepens. At high levels of green-finance penetration, the adverse effect of resource dependence becomes statistically insignificant, implying that a sufficiently developed green financial system can neutralize the structural constraints that extraction economies impose.

The study, published in the journal Digital Economy and Sustainable Development, measures green development efficiency with a super-efficiency slacks-based measure, or super-SBM, model that incorporates undesirable outputs. This approach evaluates economic production jointly with factor inputs, resource use and pollution rather than by output growth alone, and the super-efficiency extension allows efficient cities to be ranked beyond the conventional efficiency frontier. Resource dependence, in turn, is proxied by the share of mining-sector employment in total urban employment, a measure that captures how strongly local labor allocation and industrial specialization are tied to extraction and primary processing.

Green finance is represented by a city-level composite index covering green credit, green securities and green insurance, aggregated with the entropy-weight method. The green-credit dimension is proxied by the share of interest expenditure attributable to industries outside the six major energy-intensive sectors, allocated to cities according to their share of provincial industrial value added. The green-securities dimension measures the market-value share of listed environmental-protection enterprises in each city, while agricultural-insurance compensation serves as the green-insurance proxy because direct city-level environmental-liability insurance data are unavailable. The data draw on the China Industrial Statistical Yearbook, the China Urban Statistical Yearbook, the China Research Data Service Platform, Wind, and provincial and municipal statistical yearbooks, yielding 1,808 city-year observations.

The empirical core of the paper rests on two-way fixed-effects models. In the baseline specification controlling only for city and year fixed effects, the coefficient on resource dependence is -0.2462 and statistically significant at the 1 percent level. As control variables for economic development, technological progress, financial development, industrial transformation and foreign direct investment are progressively introduced, the coefficient stabilizes at -0.2055 in the full specification, remaining negative and significant at least at the 5 percent level. The authors interpret this as robust evidence that resource dependence systematically undermines green development efficiency in resource-based cities.

The moderating result emerges when the green-finance index and its interaction with resource dependence enter the model. The interaction term is positive and statistically significant at the 5 percent level, indicating that the inhibitory effect of resource dependence weakens as green financial development increases. A simple-slope analysis makes the pattern concrete: at a low level of green finance, the marginal effect of resource dependence is -0.2619 and significant at the 1 percent level; at the mean level it narrows to -0.1728; and at a high level it falls to -0.0836 and loses statistical significance altogether. The monotonic narrowing suggests that a sufficiently developed green finance system can effectively neutralize the structural constraints imposed by resource dependence.

Two transmission channels help explain how this moderation works. The first is industrial-structure adjustment, measured through an industrial agglomeration index of relative manufacturing specialization. Resource dependence significantly increases this index, and the interaction between resource dependence and green finance is also positive and significant, indicating that green finance is associated with changes in manufacturing specialization in resource-dependent cities. When the agglomeration index is added to the outcome equation, the interaction coefficient declines from 0.7255 to 0.545 and becomes statistically insignificant, a pattern consistent with industrial-structure adjustment transmitting the moderating effect.

The second channel is green technological innovation, measured by the logarithm of city-level green patent applications. Resource dependence alone exerts a negative but statistically insignificant effect on green innovation in this sample, yet the interaction term is significantly positive, with a coefficient of 3.349, indicating that green finance stimulates green technological innovation in resource-dependent cities. When innovation enters the outcome equation, it is positively associated with green development efficiency and the interaction coefficient declines to 0.617 with weakened significance, supporting green innovation as a complementary transmission channel that eases financing constraints on environmentally oriented research and development.

The moderating effect is not uniform across the country. Splitting the sample along the Qinling-Huaihe Line and the 400-millimeter isohyet, the interaction term is significant at the 10 percent level in the north and at the 5 percent level in both the south and the northwest, with the coefficient descriptively largest in the northwestern subsample. The authors attribute this to the heavier reliance of northwestern cities on energy extraction and primary processing, combined with thinner financial markets, weaker innovation capacity and ecological vulnerability, which together widen the scope for green finance to redirect capital. By city development stage, the moderating relationship is statistically evident in mature-stage and declining-stage cities, with the interaction point estimate descriptively largest among mature cities, but is not statistically detected in growth-stage or regeneration-stage subsamples.

The findings survive a battery of robustness and endogeneity checks. Replacing electricity consumption with urban water supply and industrial smoke and dust with industrial solid waste generation leaves the baseline and moderating results intact. A specification using the one-period lagged dependent variable preserves both the negative resource-dependence effect and the positive interaction at the 10 percent significance level. An instrumental-variable strategy, using the logarithm of per capita domestic water supply and the interaction of average terrain slope with a linear time trend, produces a Kleibergen-Paap rk Wald F statistic of 21.248, exceeding the Stock-Yogo critical value, while the Hansen J statistic of 0.519 supports the overidentifying restrictions. The two-stage least squares estimates are larger in absolute magnitude than their ordinary least squares counterparts, and the interaction term remains positive and significant at the 10 percent level.

A comparison with 51 non-resource-based cities, which excludes provincial capitals, directly administered municipalities and cities with tertiary-sector shares above 60 percent, sharpens the interpretation. In resource-based cities, resource dependence significantly undermines green development efficiency and its interaction with green finance is significantly positive; in the non-resource-based sample, neither effect is statistically significant. The authors conclude that green finance operates not as a universal environmental subsidy but as a targeted structural-corrective tool whose value is contingent on a highly resource-dependent economic structure. They recommend differentiated green-finance deployment for resource-based regions, including regionally differentiated green-credit quotas, lifecycle-sensitive policy portfolios for cities at different extraction stages, blended-finance mechanisms for clean-technology research, and standardized disclosure of city-level green-loan balances and environmental-risk exposure. The authors also note limitations: the industrial-structure measure captures relative manufacturing specialization rather than detailed industrial composition, and future work could exploit quasi-experimental policy shocks or extend the framework to cross-country panels of resource-dependent economies.

Subject of Research: How green finance moderates the effect of resource dependence on green development efficiency in Chinese resource-based cities

Article Title: Research on the impact of resource dependence and green finance on the efficiency of green development

Article References: Weimin, L., Wenli, L., Ruijin, L., Packham, G., & Tieying, F. (2026). Research on the impact of resource dependence and green finance on the efficiency of green development. Digital Economy and Sustainable Development, 4(1), Article 13. https://doi.org/10.1007/s44265-026-00089-6

Image Credits: AI Generated

DOI: 10.1007/s44265-026-00089-6

Keywords: green finance, resource dependence, resource curse, green development efficiency, China, resource-based cities, super-SBM model, green technological innovation, industrial structure, panel data, environmental economics, prefecture-level cities