Edinburgh Napier University

  This study explores the environmental impact of industrial land prices and strategic interactions among local governments in China, with a focus on how they contribute to pollution. Departing from traditional economic growth models, modern approaches emphasize high-quality development and productivity, considering environmental sustainability. China faces a significant challenge in balancing its economic and environmental performance, necessitating a shift toward a greener development model. Using city-level data and industrial land transfers, we employ two-stage least squares estimates and a spatial lag model to assess the effects of industrial land pricing and local government competition on environmental pollution. Our findings indicate that lower industrial land prices exacerbate pollution, particularly in China's mid-western regions, where land supply policies have intensified this effect. Strategic interactions among local governments in these regions lead to a lose-lose scenario, diminishing the agglomeration effect and worsening environmental outcomes. However, the 2013 reform of China's evaluation system, which placed greater emphasis on environmental protection, has alleviated some of the pollution effects driven by low land price competition. We conclude that reducing land allocation distortions and their spatial spillover effects is critical to achieving high-quality, eco-friendly economic development in China.