Will the increase in local land-based revenues lead to an improvement in environmental quality? An empirical study through the lens of land finance in China

Abstract

The issue of environmental governance has received considerable attention. While extensive research focuses on the relationship between economic growth and environmental protection, this paper provides a different perspective by exploring the mechanisms affecting the relationship between land-based revenue and environmental performance. Based on the regression analyses of province-level data during 2000-2018 in China, the results show that: (1) land-based finance has a significantly positive impact on air pollution; (2) both central government policies and local residents’ concerns incentivize local governments to improve environmental quality through land revenue; (3) regional differences exist regarding the impact of these two factors, probably due to various development stages and financial conditions; (4) local governments tend to increase expenditure on environmental protection by taking residents’ concerns into consideration. This research contributes to understanding the driving forces behind the relationship between land finance and environmental performance, and it extends our knowledge of local governments’ decision-making processes to accomplish multiple tasks.

Keywords:

• environmental governance
• air pollution
• land transfer fees
• environment protection investment
• Chinese decentralization

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 The extra-budgetary revenue is mainly from fees and funds. Even though the central government attempts to enhance the scrutiny and transparency of spending extra-budgetary funds, local governments still have much discretion in the disposal of their extra-budgetary revenue.

2 https://en.wikipedia.org/wiki/2013_Eastern_China_smog

3 Due to data limitations, the data in the second half of the year were used to calculate the average value in 2013.

Additional information

Funding

This research received financial support from Sichuan Funding for Social Sciences (SC20C011); the Project of Sichuan University (2021CXC03); the China Scholarship Council Fund.