Review Reports - The Economic Impact of Green Credit: From the Perspective of Industrial Structure and Green Total Factor Productivity

Round 1

Reviewer 1 Report

Dear authors

Please incorporate the following comments:

1. The theoretical issue is not clear in the introduction.

2. It is suggested to tabulate the conceptualization and operationalization of all variables under study.

3. Compare results obtained with previous studies' findings.

4. It is not clear how the study can contribute to the knowledge. You may add a separate section for this.

Author Response

Response to Reviewer

Dear Reviewer,

Thank you for your letter and the comments on our manuscript. Those comments are very helpful for revising and improving our paper, as well as being important to guide other research. We have studied the comments carefully and made corrections that we hope will meet with approval. The main corrections are in the manuscript with marked down version and the responses to your comments are as follows.

The theoretical issue is not clear in the introduction.

In the introduction section, we add what needs to be improved in the current research on green credit, as well as the main work done in this paper and the conclusions. Thank you for your valuable suggestions!

It is suggested to tabulate the conceptualization and operationalization of all variables under study.

We have tabulated the abbreviations, definitions, and calculations for all variables used in this paper. The tables are represented in the appendix section and the types of variables include explanatory, explanatory, control, mechanism, and instrumental variables. The variables throughout this paper are now clearer and appreciate your comments!

Compare results obtained with previous studies' findings.
It is not clear how the study can contribute to the knowledge. You may add a separate section for this.

For the questions with 3 and 4, we deal with them by adding a separate discussion section. The discussion section is where we integrate the marginal contributions to the relevant literature by comparing the current studies. Four main fields are covered: the study of green credit for regional economies, industrial structure, green total factor productivity, the heterogeneity of green credit and the possible provincial features that influence its issuance. The last part is less involved by current research. Thanks for the great advice!

We also have examined the whole paper word by word, and sought professional scholars to revise the words, grammar, and structure of long and short sentences, etc. Once again, we’d like to thank you very much for your constructive comments and suggestions that will help us improve the quality of the paper both in English and in depth.

Kind regards,

All the authors

Author Response File: Author Response.pdf

Reviewer 2 Report

A few comments:

1. Despite "regional economy" featuring in your title, it feels as though the regional impacts are a tertiary portion of your research. I would recommend refocusing it around regional impacts or simply changing the title to better fit the study.

2. Your first hypthesis is very unclear. I'm not sure what you mean by "enhance the rationalization" given that you are talking about lending priority. Do you mean distribution?

3. Table 1: write out the factors instead of using abbreviations.

4. Table 2: Since you are looking at regions, why not also show how the regions differ by looking at the descriptive statistics from table 1 subdivided by those regions.

5. Why are equations 2 and 3 separated? And why do you have a dummy in there and a fixed effect for regional differences? Your regression regional regression seems to me to be invalid. Likewise why have tables 4 and 5. If you're going to admit to fixed effects playing a role, why not incorporate them together? All you are showing in table 4 is that your first two models are invalid because of major omitted variable bias.

Simply put at this stage, I do not trust your results.

I recommend reevaluating what you intend to show, why it is important, and then use appropriate techniques to test it.

Author Response

Response to Reviewer

Dear Reviewer,

Thank you for your letter and the comments on our manuscript. Those comments are very helpful for revising and improving our paper, as well as the important guiding significance to other research. We have studied the comments carefully and made corrections which we hope meet with approval. The main corrections are in the manuscript with marked down version and the responses to your comments are as follows.

Despite "regional economy" featuring in your title, it feels as though the regional impacts are a tertiary portion of your research. I would recommend refocusing it around regional impacts or simply changing the title to better fit the study.

In combination with your suggestions, the entire presentation of our paper focuses on the economic impact of green credit and the analysis of the mechanisms behind it. Regional heterogeneity is a further analytical section and is not the focus, so we have changed the title. However, by "regional economies" we mean that the data used are from each province and the conclusions drawn are about the effects of green credit on the economy of each province. This is very different from the microscopic point of view, which is the focus of some current studies [1, 2, 3]. So the regions for title are mainly the provinces reflected in the data that we use, and not the East, Central and West parts. While China, government policies are mainly directed towards the East, Central and West regions, for example, R&D subsidies for the West, and there are almost no significant policy differences across provinces. Therefore, we control for these fixed effects to capture unobservable policy effects. However, we have chosen to modify the title so as not to cause misunderstandings. Thank you for your valuable suggestion!

Your first hypothesis is very unclear. I'm not sure what you mean by "enhance the rationalization" given that you are talking about lending priority. Do you mean distribution?

We have modified the expression of the first hypothesis. In this section we express the idea that in the early period when green credit was not widespread, polluting firms grew rapidly and the local industrial structure was distorted. Later, as green credit was issued, it became more difficult for polluting firms to obtain credit. At this point, polluting companies face two choices: make changes to bring themselves into compliance with green credit requirements or exit the market, at which point either choice will alter the original over-expansion pattern. The development of polluting enterprises is restricted, and environmentally friendly enterprises are supported, thus changing the local industrial structure. Therefore, we propose hypothesis 1: the issuance of green credit exert a positive impact on changes in industrial structure. The previous expression of hypothesis 1 as enhancing the level of industrial rationalization is to connect with the following mechanism analysis. We now modify it and explain it at the mechanism analysis. The level of industrial rationalization is constructed to measure these changes. Thanks for the great advice!

Table 1: write out the factors instead of using abbreviations.

At Table 1, we have presented the full name of each variable, and we have added a table at the appendix about the specific calculation method of all variables used in this paper. Thank you for your suggestions!

Table 2: Since you are looking at regions, why not also show how the regions differ by looking at the descriptive statistics from table 1 subdivided by those regions.

At Table 2, we added a column to observe the test for differences in the means of the variables between the East and West regions. We found that: there are significant differences in GDP, foreign direct investment, R&D and environmental regulation index between them. The differences are close to or exceed the overall mean.

Therefore, the economic effect of green credit cannot be generalized. We are considering whether to perform sub-regional tests in the mechanism analysis at next research. This may be a new direction. Thank you for your valuable suggestions!

Why are equations 2 and 3 separated? And why do you have a dummy in there and a fixed effect for regional differences? Your regression regional regression seems to me to be invalid. Likewise why have tables 4 and 5. If you're going to admit to fixed effects playing a role, why not incorporate them together? All you are showing in table 4 is that your first two models are invalid because of major omitted variable bias.

Based on your suggestions, we found that the original model (3) had some omitted variable bias in the setup of model (2), so we chose to keep model (2) and delete model (3). And report the fixed effects estimates in Table 3. We find that the issuance of green credit gradually decreases as its geographic location moves to the west (the fixed effect in the western region is about -0.071^*** to -0.073^***). Also, in the most intuitive way, you can find in Figure 2 (left) that the distribution of green credit is gradually decreasing towards the west. The results of our estimation are robust.

One of the reasons for setting Table 4 with 3 columns is that we want to test whether the effect of green credit on the economy is still significant without the inclusion of control variables and fixed effects, i.e., a preliminary robustness test. After determining that the coefficients in column (1)(2) of Table 4 are significant, we incorporate control variables and fixed effects in all subsequent regressions without reporting an estimated model similar to column (1)(2) of Table 4.

Figure 2 shows that there are jumps in their distribution of the explanatory variable, especially at two ends. And Table 5 mainly estimates whether the economic effect of green credit remains significant at different points of the lnGDP (25th, 50th, 75th, and 90th quartiles), i.e., Table 5 column (2)-(5), and column (1) represents the alternative measure of lnGDP, all models include the same control variables as well as fixed effects. Therefore, Table 4 and Table 5 are not duplicated. Thank you for your valuable comments!

We also have examined the whole paper word by word, and sought professional scholars to revise the words, grammar, and structure of long and short sentences, etc.

Once again, thank you very much for your constructive comments and suggestions which would help us improve the quality of the paper both in English and in depth.

Best regards,

All the authors

References

Lha, B.; Lz, A.; Zz, C.; Dw, A.; Feng, W. A., Green credit, renewable energy investment and green economy development: Empirical analysis based on 150 listed companies of China. Journal of Cleaner Production 2019, 208, 363-372.
Liu, X.; Wang, E.; Cai, D., Green credit policy, property rights and debt financing: Quasi-natural experimental evidence from China. Finance Research Letters 2019, 29, 129-135.
Yang, Y.; Zhang, Y., The Impact of the Green Credit Policy on the Short-Term and Long-Term Debt Financing of Heavily Polluting Enterprises: Based on PSM-DID Method. International Journal of Environmental Research and Public Health 2022, 19, (18).

Author Response File: Author Response.pdf

Reviewer 3 Report

I hope this comments may contribute to improve the quality of this paper. However, this is an interesting issue in environmental and economic development that may contribute to understand the importance of green credit to regional economy.

1. English language and style are fine/minor spell check required.

2. The Introduction can be improved stating since the beginning the main results and contributions achieved in this research.

3. Section 7 can be improved discussing in more detail conclusions and policy recommendations. For example, how these results contribute to understand the importance of green credit to regional economies.

Author Response

Response to Reviewer

Dear Reviewer,

English language and style are fine/minor spell check required.

We have examined the whole paper word by word, and sought professional scholars to revise the words, grammar, and structure of long and short sentences, etc. Thank you for your comments!

The Introduction can be improved stating since the beginning the main results and contributions achieved in this research.

Section 7 can be improved discussing in more detail conclusions and policy recommendations. For example, how these results contribute to understand the importance of green credit to regional economies.

We have added a separate discussion section. The discussion section is where we integrate the marginal contributions to the relevant literature by comparing the current studies. Four main fields are covered: the study of green credit for regional economies, industrial structure, green total factor productivity, the heterogeneity of green credit and the possible provincial features that influence its issuance. The last part is less involved by current research. In the policy recommendation, we propose a new one based on the mechanism analysis. Thanks for the great advice!

Once again, we’d like to thank you very much for your constructive comments and suggestions that will help us improve the quality of the paper both in English and in depth.

Kind regards,

All the authors

Author Response File: Author Response.pdf

Reviewer 4 Report

This paper is worth considering for publication in Sustainability. If I understood the argument correctly, the authors aim to evaluate the economic ramifications of green credit in China from the standpoint of regional differences. But what I find perplexing is that the important literature on regional evolutionary economic geography focusing on lock-ins, path-dependence, and options for moving beyond path-dependence is not even mentioned, despite its centrality to the theoretical aspects that this piece of research aims to address (see especially Simandan, D., 2012. Options for moving beyond the canonical model of regional path dependence. International Journal of Urban and Regional Research, 36(1), pp.172-178. & Martin, R., 2012. (Re) placing path dependence: a response to the debate. International Journal of Urban and Regional Research, 36(1), pp.179-192.). So one obvious item that needs addressing is section 2 Literature Review, where this body of directly relevant literature should be acknowledged in a sentence or two.

The other weakness of the current manuscript is its China-centrism: I understand that the empirical data is from China, but what are the broader lessons for implementing green credit in other jurisdictions beyond China? The discussion section of the paper should be edited and slightly rephrased to reflect this effort to go beyond relevance to China only.

Finally, I also have some concerns about the jargon of economics used in this paper, which is fine for an economics journal, but not so much for an interdisciplinary/transdisciplinary journal like Sustainability. This journal is read widely in environmental studies, by scholars who have a social science background, but not necessarily an economics background. I do not think that the authors of this paper have made the requisite effort to address the non-economics audience of this journal. They should edit the text to make sure that the key message of the paper reaches out to scholars interested in sustainability, but with less exposure to the jargon of economics.

Author Response

Response to Reviewer

Dear Reviewer,

About the literature review

In the literature review section, we have made improvements based on your comments, and supplemented the literature you provided and other similar literature. Thank you for your comments and suggestions. The improvement of this part will enrich the literature review of this article.

About the discussion

We have generalized the conclusions of this paper slightly that we hope will be adopted by the international community. Of course it's unlikely, but we've tried. That's really something we didn't think about when we wrote it. At the same time, we very much hope that our research will contribute to a region facing both economic and environmental problems based on China's experience.

About the jargon

We have re-read all the expressions in the paper and dealt with the issues you mentioned. For example, the reasons for controlling fixed effects are supplemented, and a note about each table is added, i.e. what the table shows. Finally, we briefly describe the idea of instrumental variable estimation, and delete some technical terms, such as Hausmann test. This is indeed an issue that we have ignored before. Thank you for your advice.

We also have examined the whole paper word by word. Once again, we’d like to thank you very much for your constructive comments and suggestions that will help us improve the quality of the paper.

Kind regards,

All the authors

Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

The paper is easier to read but you still miss the point that readers will not be able to trust your results. Look at your own response to #4. That's a major problem with your analysis. I would strongly recommend dropping this line of study and instead focusing on what you are describing in your follow-up.

Author Response

Response to Reviewer

Dear Reviewer,

Thank you again for your helpful suggestions on this article. We only consider that the next research may consider the regional heterogeneity mechanism, and have not yet started to try. It's just our vision, and it may not work out. Of course, according to your suggestion, we will definitely not include this part in this article. The main point of this paper is to express the effect of green credit on economic growth and the possible mechanism behind it.

At the same time, we have checked the article again for possible errors in grammar, punctuation and so on. Once again, we’d like to thank you very much for your constructive comments and valuable suggestions that will help us improve the quality of the paper.

Best regards,

All the authors

Author Response File: Author Response.pdf

Reviewer 4 Report

The authors are to be commended for making an effort to address each of my three concerns I expressed in my initial report. As a result of the corrections implemented, the manuscript is in better shape and I am now able to recommend that it be accepted for publication "as is" in this journal.