Do factor market distortions inhibit the green innovation efficiency of the manufacturing industry? A mechanism and heterogeneity

Correcting factor market distortions is an important means of improving the green innovation efficiency (GIE) of the manufacturing industry. Based on 2005–2019 panel data from 30 Chinese provinces, this study uses the system generalized method of moments model to explore the impact of such distortions on the GIE of the manufacturing industry. The results indicate that these distortions significantly inhibit the improvement of the GIE of the manufacturing industry and that the capital factor market distortion (DistC) has a greater inhibitory impact on the GIE than the labor factor market distortion (DistL). Effective government intervention can alleviate capital and labor factor market distortions, thus promoting the GIE of the manufacturing industry. This finding is consistent with our results obtained under the influence of the level of economic development. The influence of DistC and DistL on GIE is regionally heterogeneous.