Abstract

This study aimed to examine the impact of China's Green Finance Reform and Innovation Pilot Zone policy on urban employment trends. The policy was used as a quasi-natural experiment to understand its influence on the average annual employment dynamics across Chinese cities from 2013 to 2022. We employed a staggered Difference-in-Differences (DID) model to examine the policy's effect on urban employment carefully. Our findings indicate that the green finance pilot policy stimulated employment growth at the city level. Subsequently, we discuss the contrasting firm-level effects. Interestingly, the green finance pilot policy has a negative impact on firm-level employment growth. Moreover, the influence varies significantly depending on regional financial development, corporate factor intensity, and ownership structures. This difference between city-level and firm-level outcomes is due to labor shifting from firms with high environmental and social risks to those with lower risks and reallocating labor from secondary to tertiary industries. These findings suggest that green finance reforms have nuanced effects on employment. While they may dampen growth at the firm level, they could foster growth at the city level. Our study provides empirical insights that could help refine the green finance pilot policy and optimize urban industrial structures.