*4.3. Endogenetic Test*

There are many factors that affect urban construction land supply. Although some variables affecting land supply are controlled in this paper, there may still be some factors that are not considered by the model. In addition, the bidirectional causality relationship between explanatory variables and explained variables may also produce endogeneity. In this paper, the first-order and second-order lags of environmental decentralization are used as instrumental variables, and two-stage least square (2SLS) regression is used to

eliminate endogenous effects [78]. The generalized method of moments (GMM) can deal with endogenous issues [79]. In this paper, the system generalized method of moments (sys-GMM) is used to further avoid the endogenous and weak instrumental variables [50]. The endogeneity test results are shown in Table 5.



Note: values in parentheses are *t* statistics; \*, \*\*, and \*\*\* represent that the coefficients are significant at the levels of 10%, 5%, and 1%, respectively; the *p* values of Underidentification test, Hansen J statistic, AR(2) and Sargan test are in parentheses; the critical value of 10% significance is shown in the brackets of Weak identification test.

Table 5 shows that the impact of environmental decentralization on urban construction land supply is significantly positive, at a 10% level, whether estimated using the 2SLS model or the sys-GMM model. After accounting for endogeneity, the impact of environmental decentralization on urban construction land supply is still significantly positive.

### **5. Further Analysis**

#### *5.1. Intermediary Mechanism*

Theoretical analysis has shown that land finance dependence and land resources misallocation increase the scale of local government construction land supply. Land financial dependence can be measured by indicators such as the proportion of land transfer income to GDP [80], the proportion of land transfer income to local government fiscal revenue [81,82], and per capita land transfer income [83]. In this paper, the proportion of land transfer revenue in the general public budget revenue of the local government is used to represent the land financial dependence of local government. Land resources misallocation in this paper refers to the unreasonable allocation between different uses of construction land. This is because the government supplies a great deal of industrial land at low prices, resulting in a high proportion of industrial land. Scholars believe that agreement transfers go hand in hand with the supply of industrial land at low prices. Thus, the proportion of land transferred by agreement to the total land transfer area can be used to measure the degree of land resource misallocation [16]. The estimated results of the intermediary effect are shown in Table 6.

Table 6 shows that the impact of environmental decentralization on land financial dependence and land resource misallocation is significantly positive, at a level of 1%, which indicates that environmental decentralization exacerbates land financial dependence and land resource misallocation. Comparing the columns (3)–(5) in Table 6, it can be found that the impact of environmental decentralization on land supply is significantly reduced after controlling land financial dependence and land resource misallocation. It shows that


the two intermediary variables have a remarkable influence on urban construction land supply [84].

**Table 6.** Intermediary effect estimation results.

Note: values in parentheses are *t* statistics; \*\*, and \*\*\* represent that the coefficients are significant at the levels of 5%, and 1%, respectively.

#### *5.2. Heterogeneity Analysis*

After environmental decentralization, urban construction land supply by local governments should be balanced and chosen among fiscal revenue, economic growth, and environmental protection. Local governments with high pressure on fiscal revenue and economic growth may loosen environmental control and transfer a great deal of construction land for obtaining more land transfer income and better political performance. Local governments with high environmental protection pressures are more inclined to protect the environment and will not supply a great deal of construction land. In order to contrast the different influences in the regions with different financial pressure, economic growth pressure, and environmental protection pressure, this paper uses the median of pressure to divide the provinces into two types of regions. Referring to Li (2015), the calculation of financial pressure is attained by the proportion of the disparity between fiscal expenditure and fiscal revenue to GDP [50]. The provinces are divided into high and low financial pressure regions based on the median of the average financial pressure in each province from 2003 to 2015. Providing more land can boost economic growth [85]. The regions with high economic growth pressure have a stronger willingness to supply more construction land. Referring to Yang (2016), regional economic growth pressure is represented by the divergence between the local GDP growth rate of the current year and the last year [86]. Similarly, the regional division standard is the median of the average economic growth pressure. Chemical oxygen demand (COD) and SO<sup>2</sup> are often used to indicate pollution levels [87,88]. COD is mainly produced by industrial enterprises, and is often used as an important indicator to measure environmental pollution. Therefore, COD emissions per unit of GDP are used to measure environmental protection pressure. The regional division of environmental pressure is in accordance with financial pressure and economic growth pressure. The estimated results for regions with distinct financial pressures, economic growth pressure, and environmental protection pressures are shown in Table 7.

From the perspective of financial pressure, the effect of environmental decentralization on urban construction land supply is significantly positive, at a level of 10%, in the regions with high financial pressure, but it is not significant in the regions with low financial pressure. Moreover, the regression coefficient of environmental decentralization in regions with high financial pressure is larger (0.609 > 0.396). The results show that environmental decentralization prompts local governments with high financial pressure to increase construction land supply to ease financial pressure.

From the perspective of economic growth pressure, the effect of environmental decentralization on urban construction land supply is markedly positive, at a level of 10%, in regions with high economic growth pressure. The influence is negative in regions with low economic growth pressure, and it is not significant. The regression coefficient of environmental decentralization in regions with high economic growth pressure is larger

(0.845 > −0.007). It shows that the motivation of local governments, which relies on construction land supply to boost economy, distorts the impact of environmental decentralization.


**Table 7.** Subregional estimation results.

Note: values in parentheses are *t* statistics; \*, \*\*, and \*\*\* represent that the coefficients are significant at the levels of 10%, 5%, and 1%, respectively.

From the perspective of environmental protection pressure, the impact of environmental decentralization on urban construction land supply is significant, at a level of 5%, in the regions with low environmental protection pressure, and it is not significant in the regions with high environmental protection pressure. Moreover, the regression coefficient of environmental decentralization in the regions with low environmental protection pressure is larger (0.760 > 0.245), which indicates that environmental decentralization has a greater influence on construction land supply in regions with low environmental protection pressure. The cause for such a phenomenon is that the environmental constraints in regions with low environmental protection pressure are relatively weak. When the degree of environmental decentralization increases, local governments tend to supply more construction land to improve economic and political performance.

#### **6. Policy Suggestions**

The research of this paper provides some policy ideas for local governments to reasonably supply urban construction land against the background of Chinese decentralization.

(1) The environmental management power and responsibilities of the central and local governments should be reasonably divided, and the incentive and restraint mechanisms for construction land supply should be adjusted. The original intention of environmental decentralization is to realize the localization of environmental management and improve the efficiency of environmental management. However, in practice, local governments are encouraged by fiscal revenue and political performance to loosen environmental control and increase construction land supply in the background of environmental decentralization. By decentralizing the environmental administrative power and centralizing the environmental supervision power, local government's target choice and land supply behavior can be efficaciously restrained. In addition, strengthening the central environmental protection constraints can increase the environmental preferences of local governments and encourage them to reasonably supply construction land. Some measures should be used, such as strictly implementing the environmental protection supervision system and improving the importance of environmental protection indicators in performance appraisal.

(2) Differentiated environmental decentralization should be implemented to form differentiated construction land supply incentives. The strong economic and political incentives brought by urban construction land to local governments make environmental decentralization ineffective in regions with high financial pressure, high economic growth pressure, and low environmental protection pressure. The central government ought to strengthen environmental centralization in these three types of regions. While empowering local governments with environmental administrative power, the central government's regulatory powers ought to be enhanced to restrict local governments' land supply behavior that damages the environment. In regions with low financial pressure, low economic growth pressure, and high environmental protection pressure, the central government should increase the degree of environmental decentralization to improve environmental management efficiency.

(3) The land financial dependence of local governments ought to be weakened. Looking for new sources of income and changing financing methods can alleviate the financial pressure of local governments and weaken their land financial dependence. Specific measures can be implemented from two aspects: open source and throttling. Firstly, the fiscal and taxation systems ought to be innovated to increase the tax revenue of local governments, such as levying property tax and inheritance tax, and so on [89]. Secondly, BOT (build-operate-transfer) and other financing modes could be adopted in infrastructure construction to alleviate the financial pressure of the government [90]. Moreover, the land lease can be changed to annual lease, and the land transfer income can be changed from one-time income to continuous income. While ensuring the government's stable income, the urban construction land supply for obtaining short-term economic profits can be controlled.

In addition, urban planning is an important means to control the expansion of construction land scale. The government's environmental policy objectives should be fully considered when formulating land use plans [91]. In the use of land, it is necessary to strengthen the guiding and standardizing roles of planning, and realize the scientific and rational allocation of land for different purposes, such as urban construction land and agricultural land.

#### **7. Discussion and Conclusions**

#### *7.1. Discussion*

In recent years, China's environmental problems have gradually come to light. Under the environmental decentralization system, the environmental management power of the central government has gradually been strengthened [92]. This shows that the central government is trying to find a balance of environmental decentralization to coordinate the economic growth goals and the environmental protection goals of local government. We integrated environmental decentralization into the Chinese decentralization framework. Then, under the framework of Chinese decentralization, the incentives and constraints of environmental decentralization, fiscal decentralization, and political centralization on the supply of construction land by local governments were studied.

Our research enriches the Chinese decentralization framework. Previous studies have only emphasized the incentives of fiscal decentralization and political centralization on local government land supply [64,85,93]. Tang (2019) focused on the impact of environmental politically binding indicators on local governments' land violations [36]. However, there has been no in-depth analysis of the impact of environmental management systems on local government land supply. More importantly, the expansion of urban construction land against the background of resource constraints and environmental protection has been more strictly regulated [94]. Clarifying the incentives and constraints of government land supply is conducive to achieving the rational allocation of urban land.

Our research results suggest that environmental decentralization reduces the performance of land environmental management in China. This differs from Laskowski (2005) and Blundell (2021), in that environmental decentralization improves performance by improving environmental policy adaptability [44,45]. As Ulph (1998) argued, information asymmetry between local and central governments in the context of Chinese decentralization distorts the performance of environmental decentralization [46]. Among the three environmental management affairs of administration, supervision, and monitoring, supervision decentralization has the most obvious promotion of the expansion of construction land. Our research also shows that the impact of environmental decentralization on construction land supply regionally varies. Where economic, political, and environmental protection constraints differ, the performance of environmental decentralization is also different. Fredriksson's study of 110 countries also concluded that there were regional differences in environmental decentralization performance [95].

Although our study is based on the specific situation in China, it is also meaningful to analyze government actions in the supply of urban construction land in other countries. The impact of local government incentives and constraints on urban construction land supply also exists in Western countries. Götze (2021) found that municipalities in Germany and the Netherlands also provide a loose supply of urban land due to financial incentives [96]. Perrin (2018) and Kurnia (2021) studied the impact of decentralization on the expansion of urban construction land in France, Italy, and Indonesia [17,18].

#### *7.2. Conclusions*

The economical and intensive use of land resources is an important measure to push ecological civilization construction. Practice in western countries has proved that decentralization can reduce information asymmetry and principal-agent risks, and improve policy efficiency. However, decentralization may also allow local governments to loosen environmental regulations to attract investment, which could boost economic development. Under the Chinese decentralization framework, fiscal decentralization and political centralization provide incentives for local governments to supply a great deal of urban construction land to make up for fiscal gaps and support economic growth. Environmental decentralization increases the possibility of local governments to loosen environmental regulation, which promotes the expansion of construction land supply. The efficiency of environmental decentralization is further reduced. Based on the theoretical analysis of the effect of environmental decentralization on construction land supply, the interprovincial panel data from 2003 to 2015 were used for analysis. The main conclusions are as follows:

(1) Environmental decentralization promotes the expansion of urban construction land supply scale. Environmental decentralization intensifies the positive incentives of economic and political incentives to the supply of construction land, and weakens environmental constraints. Due to the important role of construction land in local economic development, local governments usually choose to relax environmental control and supply a great deal of construction land.

(2) Environmental decentralization promotes the expansion of urban construction land supply by strengthening land financial dependence and distorting land resources misallocation. Environmental decentralization increases the possibility of "land rent", "land tax", and "attract investment by land", while weakening environmental constraints. This raises land financial dependence and the misallocation of land resources, which accelerates the swell of construction land supply scale.

(3) Environmental decentralization has diverse incentives and constraints in regions with distinct financial pressure, economic growth pressure, and environmental protection pressure, and has different impacts on construction land supply. In regions with high financial and economic growth pressure, local governments, driven by economic and political incentives, choose to relax environmental constraints and supply a great deal of construction land. In regions with low environmental protection pressure, local governments have lower environmental constraints. The impact of environmental decentralization on urban construction land supply is greater than that in regions with high environmental protection pressure.

#### *7.3. Limitations and Future Research*

There are some deficiencies in this study. First, this paper only pays attention to the effect of environmental decentralization on the urban construction land supply scale of local government. However, the construction land supply structure of different uses and industries is also affected by the preferences and behaviors of local government, which is a content worthy of study. Second, due to data limitations, this paper only focuses on the impact of decentralization and centralization between the central government and provincial governments on urban construction land supply. However, Chinese governments at or above the county level are empowered to supply land. The impact of decentralization and centralization between the upper and lower governments below the provincial level on land

supply is also worth studying. Third, this paper only studies the impact of environmental decentralization on construction land supply in the context of China's specific system. However, there may be differences in the performance of environmental decentralization in different institutional contexts. In the future, comparative analysis with other countries could also be carried out.

**Author Contributions:** Conceptualization, L.H., P.T. and X.W.; methodology, P.T. and X.W.; software, X.W.; validation, P.T. and X.W.; formal analysis, P.T. and X.W.; investigation, X.W.; resources, P.T. and L.H.; data curation, X.W.; writing—original draft preparation, P.T. and X.W.; writing—review and editing, P.T., L.H. and X.W.; visualization, X.W.; supervision, P.T. and L.H.; project administration, P.T. and X.W.; funding acquisition, P.T. and L.H. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research was funded by the National Social Science Fund (19BJY110) and the Project of Sichuan University (2021CXC03).

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Not applicable.

**Data Availability Statement:** Publicly available datasets were analyzed in this study. These data can be found at: https://data.stats.gov.cn/, and https://data.cnki.net/Yearbook/Navi?type=type& code=A, accessed on 14 June 2022.

**Acknowledgments:** The authors are particularly grateful to the anonymous reviewers for their comments and suggestions which contributed to the further improvement of this paper.

**Conflicts of Interest:** The authors declare no conflict of interest.

### **References**


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