Land Regulation and Local Service Provision: Can Economic Growth and Environmental Protection Be Achieved Simultaneously?

Abstract

This study examines the impact of China’s industrial land approval reform (ILAR) on the provision of subnational services. Utilizing the 2011 pilot reform policy approved by the State Council, we utilize a staggered Difference-in-Differences (DID) method to determine the reform’s impact on local economic growth and environmental protection. The findings reveal that the reform enhances local economic development and decreases pollution levels. Additionally, the reform significantly decreases land resource misallocation in pilot cities, enhancing productivity. We also find that local governments allocate more land to the tertiary sector through this reform, achieving industrial upgrading. The optimization effects are more pronounced in cities with higher fiscal pressure. Based on these findings, we recommend that policymakers sustain decentralization efforts and consider further incentives for cities under fiscal stress. We fill a gap in the literature by linking land use regulation with subnational service provision, contributing to the understanding of the socioeconomic benefits of decentralization and local government service levels.