Toward inclusive green growth for sustainable development: A new perspective of labor market distortion

Abstract Labor market distortion is ceaselessly endangering the balance among economic efficiency, social equity, and environmental quality sought by inclusive green growth and sustainable development. This study develops an innovative evaluation system to measure China's inclusive green growth by using provincial panel data from 2004 to 2020. Three dimensions are covered, including economic development, social equity and welfare, and green sustainability. Static and dynamic panel econometric models are employed to investigate the effect of labor market distortion on inclusive green growth and the potential transmission channels. The spatial econometric model is further applied to study the spatial spillover effect of labor market distortion on inclusive green growth. The results indicate that labor market distortion negatively affects inclusive green growth. Technological innovation, industrial structure optimization, and export trade upgrading are transmission channels of the impact of labor market distortion on inclusive green growth. In addition to hindering local inclusive green growth, labor market distortion also decreases neighboring inclusive green growth through the spatial spillover effect. These conclusions suggest that removing distortion in the labor market and emphasizing the role of market mechanisms in labor allocation may provide a new perspective to help move toward inclusive green growth for sustainable development.