GREEN TOTAL FACTOR PRODUCTIVITY IN WESTERN BALKAN COUNTRIES BASED ON THE SBM-ML MODEL: A SUSTAINABLE FINANCE PERSPECTIVE
GREEN TOTAL FACTOR PRODUCTIVITY IN WESTERN BALKAN COUNTRIES BASED ON THE SBM-ML MODEL: A SUSTAINABLE FINANCE PERSPECTIVE

Summary/Abstract: Global warming, which is caused by increasing energy-related carbon dioxide emissions, has attracted worldwide attention. The European Green Deal aims to overcome these challenges by transforming the European Union into a resource-efficient, competitive economy that emits zero greenhouse gases by 2050, and enables economic growth to be decoupled from resource use. The driving force of high-quality development is to improve the green total factor productivity (GTFP). This is especially evident in the Western Balkan (WB) countries, and the reason for this is that these countries have the prospect of acceding to the European Union and therefore are called “enlargement countries”. Consequently, this paper analyzes the spatial differences and the evolution of GTFP in the Western Balkans, at a country and regional level, and considers the potential of sustainable finance concept to improve GTFP. In the paper the authors aim to provide a better understanding of the linkages between sustainable finance and GTFP. In the existing GTFP literature that treats the WB6 scholars took only traditional inputs (labor and capital) and desirable outputs (total output, GDP) into consideration but ignored resource inputs and deleterious environmental impacts (undesired). Hence, it is of tremendous significance to study GTFP of the WB6 countries, including resources and environmental factors. Combining the Malmquist-Luenberger (ML) index and the Slack-Based Measure (SBM) model with undesirable output, this paper uses the SBM-ML model to measure GTFP. The model was used to measure GTFP of the WB6 from 2015 to 2020 and analyzes its changes from time and space dimensions. The results from this study indicate that the higher level of development of sustainable finance can lead to the promotion of GTFP, but currently sustainable finance is very modest in scope in the selected countries. The available financial instruments in those countries are banks’ and national and international funds’ loans for energy efficiency, renewables, agriculture, air pollution, waste and water management, etc.

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