Unleashing Potential: How Human Capital Shapes the Impact of Digital Financial Inclusion on Government Green Innovation

This study investigates the mediating role of human capital in the relationship between digital financial inclusion (DFI) and government green innovation (GGI) using panel data from 285 Chinese prefecture-level cities from 2011 to 2023. Employing instrumental variable methods and mediation analysis, we find that both the breadth and depth of digital financial inclusion significantly enhance GGI. Human capital serves as a partial mediator, with this effect being particularly strong and statistically significant in regions with lower initial human capital levels. Further analysis across human capital strata reveals the nuanced role of human capital in channeling the effects of DFI. The results are robust to alternative model specifications and instrumental variables. The findings highlight the critical, synergistic role of financial inclusion and human capital, especially in less-developed regions, for fostering government-led green innovation.