Factor market distortion, ICT capital, and green development

At present, factor market distortions (FMD) hindering China’s green development remain serious. However, ICT capital can alleviate FMD, which may promote green development. This mechanism is not yet clear. To explore this issue, this study utilizes China’s 2008–2019 provincial panel data to examine the effect of FMD on green development, its action path, and the moderating effect of ICT capital. The findings indicate that (1) FMD negatively influences green development through four channels: energy intensity, pollution emissions, industrial upgrading, and technological innovation. (2) ICT capital significantly contributes to green development and corrects the negative effect of FMD on green development. (3) As ICT capital accumulates, the less damaging the effect of FMD on green development. (4) ICT capital can also contribute to green development by positively regulating the mechanisms by which FMD affects green development. (5) Institutional quality heterogeneity analysis shows that the moderating effect is significantly enhanced in regions with lower corruption, higher marketization levels, and stronger intellectual property protection. The findings highlight the policy implications of mitigating FMD through ICT to improve green development.