Mismatch in Urban Construction Land Use and Economic Growth: Empirical Evidence from China

Abstract

Seeking land use development strategies is an effective policy tool to support economic development, especially in developing countries. Previous studies evidence the indispensable role of urban construction land use (UCLU) in regional economic development. However, neglecting the two-stage characteristic and mismatch of UCLU could misinterpret the strategy. This study, considering a two-stage characteristic, aims to explore how land use development strategy affects economic development. First, we create a measure for UCLU mismatch. Second, using both linear and nonlinear models, we explore the possible relationship between the land use strategy and economic development. Subsequently, robustness and the potential path-dependent reinforcement loop (PDRL) are discussed further. Finally, the fundamental channels are investigated in the mechanism analysis section. The results confirm that temporary positive effects stimulate economic development, whereas permanent potential negative effects undermine robust economic development. In addition, the PDRL shows that irrational adoption of the strategy would mean succumbing to low- and medium-industries. We also find that land and capital demonstrate exogenous properties that function as visible hands, with economic regulation exploring UCLU mismatches and misallocation of resources. However, the overuse of these two policies could lead to an unhealthy cycle of mutually reinforcing adverse effects. Based on these findings, we propose policy recommendations to support the rational use of this strategy.