Analysis of Impact of Urbanization on Environmental Quality in China

• DOI: http://doi.org/10.1111/cwe.12195
• Author: Yan Zhang,Houkai Wei
• Published date: 01 March 2017
• Date: 01 March 2017

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China & World Economy / 85–106, Vol. 25, No. 2, 2017

©2017 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Analysis of Impact of Urbanization

on Environmental Quality in China

Houkai Wei, Yan Zhang*

Abstract

As a developing country with great regional disparities, China’s rapid urbanization

has had important impacts on environmental quality. In this study, the drivers–

mechanisms–effects (DME) model is built, which shows how element agglomeration,

scale growth, knowledge accumulation and industry evolution drive the environmental

system to change during the urbanization process. An econometric regression model

using provincial panel data is further constructed to empirically analyze the impacts

of urbanization on environmental quality. It is shown that during the process of

urbanization in China, element agglomeration and knowledge accumulation help to

improve environmental quality but with weak positive effect, while growing urban

scale and industrial structure have obvious negative effects on environmental quality.

The “inverted-U shape” (up fi rst and then down) change in the environmental quality

during China’s urbanization process is obvious. It is critical that China concentrates on

the transformations of both city development paths and urbanization models to reduce

resource and environmental costs as much as possible.

JEL codes: O18, Q51, R11

Key words: drivers–mechanisms–effects model, environmental quality, urbanization

I. Introduction

Following reform and opening up, the urbanization rate of China increased from 17.92

in 1978 to 52.57 percent in 2012, with an average annual growth rate of 1.02 percentage

points, and the average annual growth rate between 1996 and 2012 reaching 1.38

percentage points. It is expected that the urbanization rate of China will increase

*Houkai Wei, Senior Researcher, Rural Development Institute, Chinese Academy of Social Sciences, China.

Email: wei_houkai@263.net; Yan Zhang, Associate Senior Researcher, Chinese Academy of Macroeconomic

Research; Institute of Spatial Planning & Regional Economy, National Development and Reform Commission,

China. Email: guodisuozhangyan@163.com. This paper is supported by two major projects from the National

Social Science Fund, named by “Research on New Urbanization Path with Chinese Characteristics (Grant No. 08

& ZD044)” and “Research on the Keys and Diffi culities in Promoting Urbanization (Grant No. 14ZDA026)”.

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Impact of Urbanization on Environmental Quality

Houkai Wei, Yan Zhang / 85–106, Vol. 25, No. 2, 2017

©2017 Institute of World Economics and Politics, Chinese Academy of Social Sciences

0.8–1.0 percent annually in the future, thus reaching approximately 68 percent by

2030, 75 percent by 2040, and over 80 percent by 2050 (Gao and Wei, 2013). China’s

rapid urbanization over the past three decades has been based on a pattern of high

consumption, high emissions and rapid expansion (Wei, 2011), which undoubtedly has

had signifi cant impacts on resources and the environment. Chinese Premier Li Keqiang

has also listed ecological and environmental issues among the fi ve major issues that

should be considered when promoting urbanization (Li, 2012).

Two approaches can be applied to study the environmental changes due to human

(economic) activities. One approach is the environmental Kuznets curve (EKC)

hypothesis, applying the normative analysis method of environmental economics to test

the environmental Kuznets curve, which was fi rst put forward by Grossman and Krueger

(1991) based on a case study of developed countries. The EKC hypothesis shows that

environmental quality deteriorates in the early stages of economic development, and

improves as the economy develops. A number of representative studies have further

confirmed this hypothesis (Selden and Song, 1994; Torras and Boyce, 1998; Dinda,

2004). However, many scholars criticize or question this hypothesis, arguing that the

theoretical research is lacking, indicators are not representative and the estimation

of the econometric model is incomplete (Stern, 1998; Borghesi and Verceli, 2003).

Other scholars have rebuked the hypothesis of the environmental Kuznets curve

through empirical studies (e.g. Agras and Chapman, 1999; Perman and Stern, 2003).

These studies show that the changes in environmental quality at different stages of

development demonstrate different shapes, including “N,” inverted “N,” “U” and

inverted “U” shapes (Zhang, 2015). Therefore, while the EKC hypothesis is useful for

studying the long-term dynamic relationships among variables from the perspective

of empirical research, its application is limited due to the lack of theoretical analysis

of the mechanisms of changes in environmental quality. Another approach is to follow

the “IPAT” conceptual model framework (the identical equation I = PAT) proposed

by Ehrlich and Holdren in the early 1970s, where I represents environmental impact,

P refers to population, A refers to affluence (usually expressed in per capita GDP/

GDP) and T stands for technology (expressed by the environmental impact per GDP)

(Ehrlich and Holdren, 1971, 1974). This approach provides an effective research path

to decompose the effective factors of environmental quality, and, therefore, is a useful

reference for empirical research of environmental driving forces in different countries

or regions (Dietz and Rosa, 1997; Chertow, 2001; Waggoner and Ausubel, 2002; York

et al., 2003; Zhang, 2011). However, the defi ciencies of the “IPAT” model lie in that it

cannot be used to dynamically examine how the factors cause environmental quality

to change and, most fundamentally, the analysis framework based on the identical