A provincial environmental technology transition indicator for Vietnam: Green finance, spatial diffusion, and absorptive capacity

This paper develops and validates a provincial Environmental Technology Transition (ETT) indicator for Vietnam and uses it to assess whether green finance is associated with cleaner technology upgrading, eco-innovation, and energy-efficiency improvement. Using a balanced panel of 63 Vietnamese provinces over 2014-2024 (693 observations), the study combines indicator construction, principal-component validation, Spatial Durbin modelling, and an IV-spatial estimator to examine both within-province and cross-province technology-transition dynamics. The preferred S2SLS-SDM estimate indicates that a one-standard-deviation increase in green finance intensity is associated with a 0.334 standard-deviation increase in the ETT indicator (p<0.01). The spatial multiplier (M = 1.30) indicates amplification under coordinated regional shocks relative to an isolated provincial response, while the full green-finance impact also depends on the estimated direct and spatially lagged coefficients (Section 5.2). Institutional quality approximately doubles the marginal return to green finance, indicating that absorptive capacity and implementation quality condition the effectiveness of green-finance instruments. The findings support a sequencing strategy in which green-credit expansion, innovation capacity, and institutional strengthening are treated as complementary elements of environmental technology transition policy.