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.