A Two-Way Fixed Effects Estimation on the Impact of Industrial Land Supply on Environmental Pollution in Urban China

Despite the great economic growth and fast urbanization process in the past four decades, China is now suffering severely from environmental pollution. Local governments’ industrial land supply behaviors have a great impact on local investment, economic growth, and environmental pollution, which has not been effectively evaluated. To fill this gap, this paper quantitatively investigates the impact of industrial land supply by local governments on environmental pollution based on a two-way fixed effects model. A comprehensive and reliable data set for 277 Chinese prefecture-level cities from 2009 to 2017 has been collected for analysis. The findings suggest that the increase of the ratio of industrial and mining storage land to total land supply significantly increases the concentration of PM2.5. The results remain significant and robust after a series of robustness tests. The negative impacts on environmental quality caused by differences in land supply behavior are greater in the central and western regions. We further explored intermediate mechanisms for the environmental impact of local governments’ allocations of industrial land. The findings suggest that greater industrial land transfer by local governments leads to an expansion in the scale of regional secondary industry and increases in local fiscal deficit. Unbalanced industrial development, insufficient corporate innovation, and insufficient investment in environmental protection will increase pollution. This study provides a reference for improving regulatory measures on land transactions and for formulating regional polices for environmental protection.