Is There a Kuznets Curve Effect for China’s Land-Driven Development Mode?

Zhang Zhang,Song Song

doi:10.3390/su11164446

Abstract

This paper empirically investigates whether the contribution of land-driven development to economic growth has declined along with the Kuznets curve hypothesis by using a nonlinear dynamic model. Over the past 40 years, Chinese local governments have raised commercial–residential land prices, mortgaged reserve land to gain valuable funds to facilitate urban construction and then improve urbanization, and driven down industrial land prices to attract foreign direct investment (FDI) and promote industrialization. By controlling the land market, this typical land-driven development mode has played a significant role in the process of local industrialization and urbanization. However, with the change in cities’ internal and external conditions, many problems hidden in this mechanism have begun to emerge. The results from the dynamic panel data method reveal that, at the national level, the effect of land supply on local economies initially indicates an increase and then a drop, which is an inverted U-shaped curve, or the Kuznets curve effect. The impact of land-driven development has declined in China’s economic transformation period, but at the regional level, in the eastern and mid-western regions, there is a different reason.

Highlights

Since the 1990s, land has played an important role in China’s local economic development, especially in urbanization and industrialization
This paper focuses on the influence of the change of land supply on local industrialization and urbanization, studies whether or not land-driven development is still a viable option, and fills the research gap in whether this development mode is still sustainable in this economic transformation period
The objective of this study is to identify whether the effect of land supply on economic growth follows an inverted U-shaped curve, and whether the land-driven development mode is still sustainable

Summary

Introduction

Since the 1990s, land has played an important role in China’s local economic development, especially in urbanization and industrialization. Through a monopoly of land expropriation and land supply, Chinese local governments, on the one hand, have sold commercial–residential land at a high price and mortgaged reserve land to gain valuable funds to facilitate urban construction and improve urbanization, and on the other hand, have set up industrial parks and sold industrial land at a low price to attract investment and promote industrialization [1]. This unique land-driven development mode was first started in the eastern local governments; after 2000, this development mode gradually became nationwide since China’s development of the central and western region. China’s economy has maintained rapid growth for more than 30 years, and the urbanization rate increased from 26.4% in 1990 to 58.5% by the end of 2017

Objectives

Methods

Results

Conclusion