How Does Land Finance Influence Vegetation Dynamics in China?

Abstract

Land-based financing plays an essential role in urbanization in the developing world, and it is widely recognized to have profound environmental effects. However, there have been relatively few research endeavors on the impact of land finance on vegetation dynamics. This study applies fixed effects models and an instrumental variable approach to examine the impact of land finance on vegetation status and mechanisms of influence, using data for 286 Chinese cities between 2011 and 2022. The nonlinear relationship between land finance and vegetation conditions at different levels of economic development is investigated by estimating panel threshold models. The findings show that land finance exerts an inhibiting impact on vegetation conditions. The restraining effect of land finance on vegetation status tends to be more pronounced in western China or in secondary industry-led cities. The analysis of mechanisms of influence indicates that land finance negatively affects vegetation conditions by speeding up urban expansion, suppressing innovation, reducing land use efficiency, and distorting the fiscal expenditure structure. The analysis of the threshold effect suggests that land finance exerts a stronger curbing effect on vegetation status as the economic development level rises. The findings have significant policy implications for deepening reform of the fiscal system and promoting vegetation protection and restoration.

Keywords

• land finance
• vegetation dynamics
• urban expansion
• innovation activities
• China