Green Fiscal and National Economic Performance: An Explanation Based on the U-Shaped Nonlinear Relationship

Green fiscal policy is a critical macroeconomic measure for advancing global green development. This paper constructs an innovative analytical framework of national economic performance from the perspective of green fiscal expenditure. It develops a green fiscal expenditure indicator using a dual screening method integrating performance tracking orientation and the Classification of the Functions of Government framework, and systematically explores the full impact of green fiscal expenditure on economic performance through three channels: R&D efficiency, R&D input and industrial structure upgrading. Empirical results show a significant U-shaped relationship between green fiscal expenditure and national economic performance, meaning that green fiscal spending only promotes economic growth after reaching a certain threshold. Mechanism analysis indicates that green fiscal expenditure drives economic performance by enhancing R&D efficiency, expanding R&D investment and facilitating industrial structure advancement. Heterogeneity tests suggest that such U-shaped driving effects are concentrated in developing countries with relatively strong R&D capabilities. This study provides new perspectives for research on green fiscal and economic development, and offers valuable implications for policy design that coordinates global green transition and sustainable economic growth.