Is illegal farmland conversion ineffective in China? Study on the impact of illegal farmland conversion on economic growth

Habitat International 49 (2015) 294e302

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Habitat International journal homepage: www.elsevier.com/locate/habitatint

Is illegal farmland conversion ineffective in China? Study on the impact of illegal farmland conversion on economic growth Zhigang Chen a, *, Qing Wang b, Yi Chen a, Xianjin Huang a a b

School of Geographic and Oceanographic Sciences, Nanjing University, 163 Xianlin Avenue, Nanjing Jiangsu Province 210023, China School of Humanities and Social Science, Nanjing University of Posts and Telecommunications, 9 Wenyuan Road, Nanjing Jiangsu Province 210023, China

a r t i c l e i n f o

a b s t r a c t

Article history: Received 7 November 2014 Received in revised form 20 May 2015 Accepted 29 May 2015 Available online xxx

This paper constructs an econometric model for evaluating the impact of illegal farmland conversion on economic growth based on the neoclassical production function. Then the concrete impact of illegal farmland conversion on economic growth is estimated by using the panel data of 31 provinces in the Chinese Mainland between 2001 and 2012. The results show that on the whole illegal farmland conversion throughout China has had a significant positive effect on economic growth; but along with the scale expansion of illegal farmland conversion, the change of its impact on economic growth will present an inverted U-shaped curve. Furthermore, along with the Chinese government's implementation of the land supervision system for strengthening the investigation and punishment of illegal land use, the degree of the impact of illegal farmland conversion on economic growth after 2007 has obviously decreased in comparison with that in previous years. In addition, compared with legal farmland conversion, illegal farmland conversion has a greater marginal impact on economic growth in the short term. This impact of illegal farmland conversion on economic growth is closely related to the Chinese Mainland's economic growth pattern that depends on land development, the rigid annual land use plan and the imperfect land development management. At the end, policy recommendations are provided to improve the management of farmland conversion. © 2015 Elsevier Ltd. All rights reserved.

Keywords: Farmland conversion Illegal land use Economic growth Impact evaluation China

In recent years, farmland conversion has become an important way for each area in China to promote industrialization and urbanization, and to further develop the local economy (Deng, Huang, Rozelle, & Uchida, 2010; Ding & Lichtenberg, 2011; Liu, Fang, & Li, 2014). However, controlled by land use planning (tudi liyong guihua) and annual land use plan (or annual planned indicators control/tudi liyong niandu jihua), the acreage of land available to be used for economic construction by the local government through farmland expropriation is strictly restricted within the regulated scope in China. According to the Outline of National Overall Land Use Planning in China (2006e2020), between 2006 and 2020, national newly increased construction lands for economic construction will total 5.85 million ha, and the acreage of farmlands for newly increased construction will be controlled within 3 million ha (SCC,

2008). Under such circumstances, the local government usually violates the central government's regulations and breaks through the restrictions of land use planning and annual land use plan in order to realize higher economic growth objectives (which is an important index that embodies the local government's performance in China) and to obtain more land conveyance fee (tudi churangjin); while various enterprises and individuals also execute illegal farmland conversion that is being driven by economic interests (the illegal farmland conversion cases, investigated and punished by China's land management department at present, mainly include actions such as destroying farmland, occupying land without approval, and approving land use illegally, etc.) (Chen & Wang, 2013; Li, 2014; Tang & Chung, 2002). According to the statistics of the Ministry of Land and Resources of the People's Republic of China, the area of illegal farmland conversion between 1999 and 2012 increased from 5481.78 ha to 6274.83 ha,1

* Corresponding author. E-mail addresses: [email protected] (Z. Chen), [email protected] (Q. Wang), [email protected] (Y. Chen), [email protected] (X. Huang).

1 According to the statistical data of the Ministry of Land and Resources, we use the area of farmland involved in illegal land use areas to reflect the scale of illegal farmland conversion.

1. Introduction

http://dx.doi.org/10.1016/j.habitatint.2015.05.036 0197-3975/© 2015 Elsevier Ltd. All rights reserved.

Z. Chen et al. / Habitat International 49 (2015) 294e302

representing a growth rate of 14.47%, and an annual average growth rate of more than 1% (MLR, 2000e2013). In order to control the increasingly pervasive illegal farmland conversion, the Chinese central government has strengthened the supervision of illegal land use (Chen, Wang, Zhao, & Huang, 2010). In particular, the satellite imagery-based land inspection perfected since 1999 (Li et al., 2013; Zhong, Huang, Ye, & Scott, 2014), and the land supervision system (tudi ducha zhidu) implemented since 2007, etc. have produced the effect of suppressing the expansion of illegal farmland conversion to a certain degree (Tan, Zhang, & Rao, 2013). Local governments will send out appeals and requests to the central government through various channels, “Local economic development needs more farmland conversion indicators (to increase construction lands), and most illegal farmland conversion behaviors have to be implemented under the circumstances that legal construction land falls short of demand”. However, from the perspective of the central government, illegal farmland conversion not only goes against the central government's policy directives, but also threatens the sustainable development of society and economy, and the protection of resources and environment. Does illegal farmland conversion only cause harm and not bring any benefits? Is such behavior completely ineffective to social and economic development, or as local governments appeal: is illegal farmland conversion absolutely necessary and beneficial for local economic development? This problem is worthy of study. As seen from the present research on illegal land use in China, scholars pay more attention to the reasons for illegal farmland conversion (Ho & Lin, 2003; Liang, 2009; Lin & Ho, 2005; Long & Chen, 2011; Tang & Chung, 2002; Zhang, Zhang, & Xu, 2013), and discuss how to suppress the spreading of such behavior by perfecting policies and supervision measures (Li et al., 2013; Tan et al., 2013). There are relatively few studies on the impact of illegal farmland conversion, especially the impact of illegal farmland conversion on economic growth. Among the existing research, most scholars consider that illegal farmland conversion will not only induce excessive loss and low-efficiency utilization of farmlands (Zhu & Hu, 2009), but will also arouse related social conflicts and environmental problems (Cai, 2003; Guo, 2001; Tian, 2008; Tao, Su, Liu, & Cao, 2010; Wang & Scott, 2008). For example, Zhu and Hu (2009) discovered from a case study of a town in Beijing that illegal farmland conversion will induce low-efficiency utilization and loss of value of lands. Cai (2003) analyzed some farmland conversion cases in China and argued that the government and rural collective's illegal land use behavior encroached on peasants' benefits and is the main reason for the rural land use conflict. Tian (2008) also pointed out in the research on China's land market of “villages amid the city” (chengzhongcun) that illegal land transactions would create many social and environmental problems. It is not deniable that, after developing them to a certain degree that these social and environmental problems would obviously have a negative impact on economic development. In addition, some illegal farmland conversion behaviors that aim to avoid land use fees and taxes will also induce the loss of local revenue, and further, will have a negative effect on local economic development (Brueckner, 2000). Of course, as an input factor, the construction land increased through illegal farmland conversion, same as the construction land legally supplied, will possibly produce effects such as driving the increase of social investments and the expansion of employment scale, etc., and will thus promote economic growth (Wang, 2010). Obviously, under the present land use pattern and allocation mechanism in China, the impact of illegal farmland conversion on economic growth is just like two sides of a coin as it will possibly have a promotion function or blocking effect. Due to the lack of systematic empirical research, we cannot give an accurate judgment on the relationship between them. This will not

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be beneficial to the improvement of related policies and the sustainable land management in the future. This study attempts to test and analyze the concrete impact of illegal farmland conversion on economic growth in China. The remaining parts of this paper are arranged as follows: The second part is the model and data. We will establish an econometric model for evaluating the impact of illegal farmland conversion on economic growth and explain the variables in the model and their data sources. The third part will evaluate the concrete impact of illegal farmland conversion on economic growth based on the above econometric model, and further discuss the estimated results. The final part is conclusions and policy recommendations.

2. Model and data 2.1. Model The mainstream economic growth theories generally consider that land does not have great function on economic growth (Feng, Wei, & Jiang, 2008; Van der Veen & Otter, 2001). However, China's special land ownership and use right systems, and especially the government's control on land have made land play an important role in promoting economic growth (Hsing, 2010). On the one hand, local government may obtain plentiful local revenue by conveying land use right, and this is helpful to promote local infrastructure supply and economic growth; on the other hand, local government may attract investment by constructing development zone and providing industrial land, and thus promote economic growth (He, Huang, & Wang, 2014). Therefore, in recent years, many scholars have started to analyze and test the concrete effects of land use changes, especially the expansion of construction land on China's economic growth by establishing mathematical models. For example, they have studied the impact of construction land expansion on China's economic growth based on the analysis of capital output ratio (Li, Feng, & Li, 2008); or explored the relationship between land use change and economic growth by establishing structural equation model (He et al., 2014). However, more relevant researches are based on the production function model, take land as an important input factor, and test its contribution to economic growth. In order to evaluate the concrete impact of illegal farmland conversion on economic growth, this study will firstly establish an econometric model by adding variables reflecting farmland conversion (two variables reflecting legal farmland conversion and illegal farmland conversion are added simultaneously for comparative analysis) based on the neoclassical production function. Among the studies on economic growth, the neoclassical production function developed based on the “Solow Growth Model” is the most commonly used. The neoclassical production function links the growth of output with that of capital input, skilled and nonskilled labor force input, and other related inputs to explain the root of economic growth (Gillis, Radelet, Snodgrass, Roemer, Perkins, 2001). The basic expression of the function is:

EðtÞ ¼ F½KðtÞ; PðtÞ; LðtÞ

(1)

Wherein, E(t) indicates the output of period t, K(t) indicates the capital input of period t, P(t) indicates the labor force of period t, L(t) indicates the land (and natural resources) input of period t. F[K, P, L] indicates that the total output is the function of all the above three variables. In order to study output growth, we use DX(t) to represent the change of the variable X between period t and period t-1. In this way, the above production function may be converted into the following Formula 2:

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DEðtÞ ¼ MPK$DKðtÞ þ MPP$DPðtÞ þ MPL$DLðtÞ

(2)

Wherein, MPK, MPP and MPL represent the marginal output of capital, labor force and land of period t respectively. Herein, a prerequisite is that we assume the non-existence of technical advancement and institutional changes, the total growth of the output between any two periods is surely from the total growth of various investments (Ray, 1998). Of course, when the above production function model is estimated by using statistical data, the impact of other factors such as technical advancement, institutional changes, etc. on economic growth will be embodied at the error item of the model. Based on the Formula 2, and combined with the requirements of this study, we establish the economic growth model as shown in Formula 3 to evaluate the concrete impact of illegal farmland conversion on economic growth.

DEðtÞ ¼ m1 DKðtÞ þ m2 DPðtÞ þ m3 L FCðt  2Þ þ m4 L IFðtÞ

(3)

Wherein, DE(t) represents the economic growth value of period t, DK(t) represents the newly increased investment of period t, DP(t) represents the labor force increment of period t, L_FC(t-2) represents the legal farmland conversion area of period t-22, and L_IF(t) represents the illegal farmland conversion area of period t. m1, …, m4 represent the marginal outputs of the corresponding input factors. In addition, in order to further test whether the impact on economic growth changes along with the scale of the expansion of legal and illegal farmland conversion, we added two quadratic terms: L_FC(t-2)2 and L_IF(t), to the above model and finally formed the following concrete model expression for empirical evaluation (Formula 4). 2 DEit ¼ c þ a1 DKit þ a2 DPit þ a3 L FCi;t2 þ a4 L FCi;t2 þ a5 L IFit

þ a6 L IFit2 þ mit (4) Considering the availability of data, we used official statistical indexes to reflect the variables in the above model. Wherein, DEit indicates the provincial GDP (gross domestic product) value added of province i in year t (current price, unit: 100 million yuan), the variable DKit indicates the newly increased investment amount of province i in year t (current price, unit: 100 million yuan). Given the fact that a big part of capital investment is used to purchase land, we will deduct the land conveyance fee of the corresponding year when estimating the above model. The variable DPit indicates the labor force increment of province i in year t (unit: 10000 person), L_FCi,t-2 and L_IFit indicate the legal farmland conversion area (the examined and approved acreage of farmland occupied for construction, unit: 1000 ha) of province i in year t-2 and the illegal farmland conversion area (the acreage of farmlands involved in illegal land use, unit: 1000 ha) of province i in year t respectively. a1, …, a6 indicate the estimated coefficient of each corresponding independent variable, c and mit are the constant term and error term respectively. 2.2. Data The panel data of 31 provinces in the Chinese Mainland between 2001 and 2012 are used to estimate the above model. They are

2 In China, most construction lands that were examined and approved could be provided to land users in the same year. Land developers are also allowed to construct on the land one or two years after they obtain it lawfully. Therefore, for the variable L_FC, we use the two-period lagged value.

mainly sourced from the statistical data announced officially by the Chinese government. Specifically, the data of DE, DK and DP are retrieved from China Compendium of Statistics 1949e2008 (NBSC, 2010) and China Statistical Yearbook from 2002 to 2013 (NBSC, 2002e2013). The data of L_FC (1999e2010) and L_IF (2001e2012) are retrieved from China Land and Resources Yearbook from 2000 to 2013 (MLR, 2000e2013). It should be noted that a lot of illegally converted farmland have been withdrawn when it was uncovered by land inspectors. Some of this kind of construction land is converted back into farmland. But it is difficult to accurately estimate its amount. Therefore, we still use the statistical data of illegal farmland conversion. That is to say, the areas of illegal farmland conversion reported in the China Land and Resources Yearbook are those uncovered by land inspectors but not the actual areas. Table 1 lists the descriptive statistics of the above variables. It can be seen that the variable DE (the provincial GDP value added) has obvious differences in each province and different years. The maximum and minimum value of DE are 768.479 billion yuan and 2.127 billion yuan respectively, and the variance is more than 1 times the average value. The sample data of the other independent variables present an uneven distribution at a certain degree, wherein the sample data of L_FC has a low degree of uneven distribution and the variance is lower than the average value; while the sample data of DK, DP, L_FC2, L_IF and L_IF2 have a relatively high degree of uneven distribution, and the variances are obviously bigger than the average values. Before the model estimation, we may also provide an overall judgment on the relationship between economic growth and illegal farmland conversion in the Chinese Mainland in recent years from the perspective of spatial-temporal change by analyzing the statistical data of each province. On the one hand, as seen from temporal change, the provincial average GDP value added and illegal farmland conversion area mainly presented a similar trend of change from 2001 to 2012, except for some special years. Especially before 2007, both indicators presented the trend of stable growth. After 2008, the provincial average illegal farmland conversion areas gradually decreased, but the provincial average GDP value added presented an inverse change in some years (Fig. 1). On the other hand, as seen from spatial distribution, the annual average GDP value added and illegal farmland conversion area of each province presented a significant positive correlation between 2001 and 2012: In provinces with fast economic development, the annual average illegal farmland conversion area was relatively large, and the Pearson correlation coefficient reached 0.74 (Fig. 2). 3. Results and discussion 3.1. Results Many related research have argued that, along with the implementation of the land supervision system in 2007, the Chinese government has executed increasingly strict investigation and punishment of illegal land use behavior and this has had a significant effect of suppression on illegal farmland conversion (Lv, Zhong, Zhang, Huang, & Tian, 2012; Tan et al., 2013). The trend of change in the provincial average illegal farmland conversion area from 2001 to 2012, as shown in Fig. 1, has also proved this conclusion. It also means the great enhancement of the possibility for illegal farmland conversion behavior to be investigated and punished to some degree. Therefore, for those land users who attempt to obtain and develop construction land by illegally occupying farmlands, the high risk of breaking laws means the high cost of input and this will possibly aggravate their short-term land use behaviors and thus produce different impacts on economic growth. In view of this, besides estimating a full sample model (model 1) by using the panel

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Table 1 Descriptive statistics of variables used in the model. Variable

Number of observations

Minimum

Maximum

Mean

Std. Deviation

DE DK DP

372 372 372 372 372 372 372

21.27 85.72 168 2.60  103 6.76  106 0 0

7684.79 28656.93 341.08 36.36 1322.05 5.56 30.93

1288.56 4630.40 37.29 4.82 43.68 0.46 0.71

1327.41 4845.07 47.69 4.52 94.20 0.71 2.68

L_FC L_FC2 L_IF L_IF2

data of 31 provinces in the Chinese Mainland between 2001 and 2012, we also estimate two models by different periods of statistical data: model 2 (by using the sample data of 2001e2006) and model 3 (by using the sample data of 2007e2012). Comparing the estimated results of model 2 and model 3 will be helpful for us to further examine the change in the impact of illegal farmland conversion on economic growth that is possibly induced along with the enhancement of the risk of illegal behaviors. We firstly test the collinearity among the explanatory variables. The mean VIF values of the above three models are 4.62, 5.31 and 7.85 respectively, and the VIF value of each independent variable in these models is also within the reasonable scope, showing that the collinearity problem is not severe. Then, the random effect model and fixed effect model of Formula 4 are estimated by using software of STATA 11.0. We determine whether to select the estimated result of random or fixed effect model according to the Hausman's test. The result of Hausman's test shows that it is more effective for all the three models to select the result of fixed effect model. The final results of model estimation are listed in Table 2. On the whole, the R2 and F values of the three models are relatively significant. As seen from the basic input factors affecting economic growth: capital and labor force, they have significant positive effects on economic growth to a certain degree. On the one hand, the estimated results of the full sample model (model 1) show that the coefficients of the variables DK and DP are significant. This indicates that the input of capital and labor force could still obviously promote the economic growth in China. By further calculating the average elasticity coefficients of the variables DK and DP's impacts on the dependent variable, we have discovered that the increase of investment by every 1% will bring about a rise in the GDP value added of 0.62%; while the increase of labor force by every 1% will bring about a rise in the GDP value added by only 0.05%. On the other hand, as seen from the estimated results of model 2 and model 3, the variables DK and DP also have significant impacts on economic growth, but the coefficients of average elasticity are obviously different. Before 2007, the average elasticity

Fig. 1. The Changes of the provincial average GDP value added and illegal farmland conversion area from 2001 to 2012.

coefficients of the variables DK and DP's impacts on economic growth were 0.90 and 0.13 respectively; while after 2007, the corresponding coefficients were 0.33 and 0.04 respectively, indicating that the elasticity of the impact of capital and labor force input on economic growth has dropped obviously. As seen from the estimated coefficients of the farmland conversion variables (Table 2), the change in illegal farmland conversion scale (variable L_IF) has a more obvious impact on economic growth than the change in legal farmland conversion (variable L_FC). Firstly, the estimated results of model 1 show that the coefficients of L_FC and L_IF are positive. However, the estimated coefficients of L_FC2 and L_IF2 are negative, indicating that both legal and illegal farmland conversion present the inverted U-shaped relationship with economic growth. That is to say, along with the scale expansion of farmland conversion, the degree of its impact on economic growth will gradually decrease after reaching a maximum value (the point where the maximum value appears is generally called the “point of inflexion”). Specifically, as seen from the present empirical data, the scale expansion of legal farmland conversion by every 1000 ha will raise the GDP value added by (63.036e3.04*L_FC) 100 million yuan; while the illegal farmland conversion has the marginal impact of (483.319e148.55*L_IF) 100 million yuan. It is easy to discover through further calculation that when the scale of legal and illegal farmland conversion reach 20736 ha and 3254 ha (namely the “point of inflexion” mentioned above) respectively, their marginal impacts on economic growth will be negative. Moreover, it is discovered by calculating the average elasticity of the effects of legal and illegal farmland conversion on economic growth that, between 2001 and 2012, the increase of legal and illegal farmland conversion by every 1% will induce economic growth by 0.18% and 0.15% respectively. Secondly, the estimated results of model 2 show that before 2007 the impact of legal farmland conversion on economic growth was positive but insignificant statistically. Relatively speaking, the impact of illegal farmland conversion on economic growth presented a significant positive effect and the coefficient of its quadratic term was also significant. Specifically, the scale expansion of illegal farmland conversion by every 1000 ha will raise the GDP value added by (320.093e94.218*L_IF) 100 million yuan; while when the scale of illegal farmland conversion reaches 3397 ha, its marginal effect on economic growth will be negative. Moreover, between 2001 and 2006, the increase of illegal farmland conversion by every 1% will induce economic growth by 0.19%. Thirdly, the estimated results of model 3 show that since 2007 the impacts of legal and illegal farmland conversion on economic growth were all significant. The scale expansion of illegal farmland conversion by every 1000 ha will raise the corresponding economic growth by (704.813e539.404*L_IF) 100 million yuan. However, when the scale of illegal farmland conversion reaches 1307 ha, its marginal effect on economic growth will be negative. Comparatively, the marginal impact of legal farmland conversion on economic growth will be maintained at the level of 5950.9 million yuan. Moreover, between 2007 and 2012, the average elasticity coefficients of the

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Fig. 2. The annual average GDP value added and illegal farmland conversion area of each province between 2001 and 2012.

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Table 2 The results of model estimation. Explanatory variable

Model 1 (full sample)

Model 2 (2001e2006)

Constant DK DP L_FC L_FC2 L_IF L_IF2 N R2 F

9.772(79.749) 0.173***(0.011) 1.821**(0.858) 63.036***(21.864) 1.520*(0.789) 483.319***(113.844) 74.275**(29.795) 372 0.751 106.32

174.085***(66.511) 0.319***(0.035) 2.904***(0.827) 14.552(18.744) 0.369(0.586) 308.646**(144.939) 46.229*(25.180) 186 0.823 43.33

Model 3 (2007e2012) 160.856(62.992) 0.321***(0.035) 2.965***(0.820) 4.379(9.538) e 320.093**(143.510) 47.109*(25.091) 186 0.825 52.13

701.183**(335.866) 0.086***(0.023) 1.644(1.719) 39.576(67.033) 1.020(3.188) 693.838**(340.548) 265.439**(107.516) 186 0.634 8.20

631.956**(256.120) 0.086***(0.023) 1.633(1.713) 59.509**(24.673) e 704.813**(337.801) 269.702**(106.368) 186 0.630 9.88

Note: Standard errors are in parentheses. ***, **, * indicate significant at the 1%, 5% and 10% respectively.

effects of legal and illegal farmland conversion on economic growth were 0.20 and 0.11 respectively. Finally, it could easily be discovered by comparing the results of model 2 and model 3 that since 2007 the change of the marginal impact of illegal farmland conversion on economic growth was obviously bigger than that before 2007; the point of inflexion, where the marginal impact of illegal farmland conversion on economic growth become negative, appeared earlier than that before 2007; and the marginal impact of legal farmland conversion on economic growth was greatly enhanced. Furthermore, the average elasticity of the impact of illegal farmland conversion on economic growth was relieved obviously after 2007. It also shows that the strengthening of investigation and punishment of illegal land use has actually suppressed the illegal farmland conversion at a certain degree. 3.2. Discussion Firstly, some related research have pointed out that illegal farmland conversion will induce the low-efficiency utilization of land and arouse more social and environmental problems. However, the estimated results of the above models show that illegal farmland conversion could significantly promote economic growth. We consider that such a situation is not incidental. Essentially, illegal farmland conversion is also a process of increasing construction land, and as an important economic input factor the increase of construction land still has an irreplaceable promotion function in economic growth. Especially in China, which is currently in a social and economic transition period, on the one hand, the government executes annual land use plan and so the supply and demand of construction land are unbalanced and many reasonable land demands may not be satisfied. On the other hand, the failure of land policies causes plentiful construction lands that are obtained lawfully are wasted and left unused (Lin, 2010; Tan, Qu, Heerink, & Mettepenningen, 2011). The relative shortage is very obvious in the supply of construction land in China at present. Therefore, to some degree, illegal farmland conversion could meet some land demands and thus promote economic growth. Of course, illegal farmland conversion always faces the risk of being investigated and punished and some illegal behaviors are possibly investigated and punished when they just have started. Therefore, considering the very high cost of breaking the law within a short period, law-breakers will intensify illegal land development in order to realize the maximum land output as soon as possible. In this way, although illegal farmland conversion is investigated and punished, law-breakers could still obtain economic benefits. The estimated results of the above models also show that, when the scale of illegal farmland conversion is relatively small, the marginal impact of illegal farmland conversion on economic growth is usually big. Secondly, Further calculation and comparison based on the estimated results of the above models show that, even though the

average elasticity of the impact of legal farmland conversion on economic growth was bigger than that of illegal farmland conversion between 2001 and 2012, the marginal impact of legal farmland conversion on economic growth was relatively smaller as seen from the scale of legal and illegal farmland conversion in this period. Just as mentioned above, this is possibly related to the risk that illegal behavior is investigated and punished, and the short-term development behavior of illegal land users. If the illegal land use scale is relatively small, the risk that illegal behaviors are investigated and punished is probably low, and this could be seen from the marginal impact formula obtained from the above results of model estimation. Meanwhile, in order to avoid the risk of being investigated and punished, law-breakers will accelerate land development in the hope of taking back investment as soon as possible. On the other hand, the minor impact of legal farmland conversion on economic growth might have a close relationship with land users’ development strategy. Most enterprises and individuals having obtained lands do not complete overall development in a short period, and they usually develop a part of their lands in two years even though Chinese government strictly requires that a piece of land shall not be left idle for more than two years. As a result, legal farmland conversion in a short period has relatively low impact on economic growth. In addition, the Chinese land management department commonly “attach great importance to land conveyance, while attach little importance to post-approval supervision (supervision on land development behavior after examination and approval/ pihou jianguan)”, so many enterprises and individuals keep quite a part of lands not developed considering their capital scale, or wait for the right price to sell, and expect an incremental benefit from reselling the lands (Koroso, Molen, Tuladha, & Zevenbergen, 2013). This is possibly an important reason that induces the minor impact of current legal farmland conversion on economic growth. Thirdly, the current illegal farmland conversion scale plays a greater and more significant role in economic growth, but we cannot arbitrarily draw the conclusion of “encouraging the government and land demanders in China to occupy farmlands illegally”. On the one hand, the Chinese government endows lawfully converted construction lands with at least 40e70-year land use rights.3 Comparatively, illegal farmland conversion behaviors have a smaller possibility to avoid investigation and punishment under the present strict supervision.4 They may be investigated and

3 According to the regulations of the Interim Regulations of the People's Republic of China Concerning the Conveyance and Transfer of the Use Right of the State-owned Land in the Urban Areas, commercial land, industrial land and residential land have 40, 50 and 70-year use rights respectively (SCC, 1990). 4 According to the statistical data of the Ministry of Land and Resources, among the illegal land use cases discovered in 1999, 45.50% were hidden or undiscovered cases; in 2012, this proportion dropped to 23.26% (MLR, 2000e2013). Obviously, fewer and fewer illegal land use behaviors could avoid investigation and punishment.

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punished in one or two years. Therefore, as seen in the long run, legal farmland conversion will obviously make greater contributions to economic growth than illegal farmland conversion. In other words, the economic benefit arising from illegal farmland conversion can only be maintained for a relatively short period. While legal farmland conversion will experience a relatively long development and construction period, but in the upcoming several decades, it will make sustained contributions to economic growth. On the other hand, as seen from the marginal impact of legal and illegal farmland conversion on economic growth at different stages, the marginal impact of legal farmland conversion on economic growth is relatively stable. Just as mentioned above, between 2001 and 2012, the change of the marginal impact of legal farmland conversion on economic growth was by far smaller than that of illegal farmland conversion. In addition, as seen from the situations before and after 2007, the marginal impact of legal farmland conversion on economic growth was stabilized at 4.379 (2001e2006) and 59.509 (2007e2012), but when the scale of illegal farmland conversion was more than 3397 ha and 1307 ha, its marginal impact on economic growth will be negative. It could be seen from the annual average illegal farmland conversion of each province between 2001 and 2012, as shown in Table 3, that the scale of illegal farmland conversion in Shandong before 2007, and in Hebei, Jiangsu and Anhui after 2007 was more than or close to the critical value. In brief, as seen from the present empirical analysis, a moderate scale of illegal farmland conversion is beneficial for economic growth, but along with the expansion of illegal farmland conversion scale, it will produce negative effect on economic growth, so it is still extremely necessary to strictly control the scale of illegal farmland conversion. 4. Conclusions Farmland conversion is inevitable in the process of industrialization and urbanization (Bradshaw & Muller, 1998; Long, Tang, Li, & Heilig, 2007; Mazzocchi, Sali, & Corsi, 2013). Especially, under the present development pattern of China, farmland conversion has become an important driving factor for economic growth (Cao, Feng, & Tao, 2008; Xu, Yeh, & Wu, 2009; Zhang, Wang, Li, & Ye, 2014). Moreover, the governments, enterprises or individuals participating in farmland conversion could obtain benefits from therein more or less (Choy, Lai, & Lok, 2013; Guo, 2001; Whiting, 2011). Just driven by economic interests, illegal farmland conversion still exists despite repeated prohibition in China. Many related

research argue that illegal farmland conversion will arouse social conflicts and environmental problems and thus induce a negative impact on economic growth. However, this study believes that illegal farmland conversion is also a kind of land input and development behavior. If the construction lands increased through legal farmland conversion could not truly meet the demands of economic development on lands, then illegal farmland conversion within a certain scope would play a supplementary role and produce a positive effect on economic growth. In this paper, we establish an econometric model for evaluating the impact of farmland conversion on economic growth based on the neoclassical production function and by adding variables that reflect the legal and illegal farmland conversions. On this basis, we analyze and test the concrete impact of illegal farmland conversion on economic growth by using the panel data of 31 provinces in the Chinese Mainland between 2001 and 2012. The results show that on the whole illegal farmland conversion produces a significant positive effect on economic growth in China. But along with the scale expansion of illegal farmland conversion, the change of its impact on economic growth will present an inverted U-shaped curve. Moreover, taking the implementation of the land supervision system in 2007 as a dividing line, since the Chinese government strengthened the investigation and punishment of illegal land use after 2007, the impact of illegal farmland conversion on economic growth has become obviously smaller than that in previous years. In addition, the marginal impact of illegal farmland conversion on economic growth will also drop sharply along with the expansion of illegal land use scale; especially since 2007, after the scale of illegal farmland conversion reaches 1307 ha, its marginal impact on economic growth will be negative. Actually in China, present legal farmland conversion does not truly meet the land demands of social and economic development, and the relative shortage of construction land supply is still obvious. On the one hand, many reasonable land demands cannot be satisfied, and On the other hand, plentiful lawful construction lands are still developed with low efficiency or left unused. Therefore, it is not surprising that illegal farmland conversion within the scope of a certain scale plays a role in promoting economic growth. The impact of illegal farmland conversion on economic growth is also closely related to the risks it faces. In order to avoid the risk of being investigated and punished, law-breakers usually accelerate illegal land development, and this also induces the relatively great impact of illegal farmland conversion on economic growth in the short-term. Moreover, along with the

Table 3 The annual average illegal farmland conversion of each province between 2001 and 2012 (Unit: 1000 ha). Province

2001e2012

2001e2006

2007e2012

Province

2001e2012

2001e2006

2007e2012

Beijing Tianjin Hebei Shanxi Neimenggu Liaoning Jilin Heilongjiang Shanghai Jiangsu Zhejiang Anhui Fujian Jiangxi Shandong Henan

0.169 0.157 1.159 0.671 0.192 0.627 0.201 0.306 0.088 1.602 0.682 0.880 0.204 0.212 1.981 1.508

0.149 0.252 1.216 0.713 0.226 0.617 0.145 0.182 0.139 1.472 0.902 0.422 0.176 0.202 3.021 2.065

0.189 0.061 1.102 0.628 0.157 0.638 0.258 0.430 0.037 1.732 0.461 1.338 0.231 0.221 0.941 0.951

Hubei Hunan Guangdong Guangxi Hainan Chongqing Sichuan Guizhou Yunnan Xizang Shaanxi Gansu Qinghai Ningxia Xinjiang The critical value*

0.412 0.293 0.547 0.140 0.095 0.178 0.460 0.455 0.228 0.020 0.529 0.107 0.095 0.089 0.128 3.254

0.477 0.320 0.511 0.192 0.146 0.123 0.485 0.398 0.123 0.040 0.626 0.108 0.042 0.046 0.127 3.397

0.348 0.265 0.583 0.088 0.044 0.233 0.435 0.513 0.334 0.0002 0.432 0.105 0.147 0.132 0.129 1.307

Note: The data are calculated according to the statistical data of China Land and Resources Yearbook 2002e2013 (MLR, 2002e2013). * The critical value indicates the illegal farmland conversion scale when the marginal impact of illegal farmland conversion on economic growth changes from a positive value to a negative value, and it can be calculated with the marginal impact formula obtained from the above results of model estimation.

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strengthening of the measures to supervise illegal land use behavior, illegal farmland conversion will have greater risks, and the short-term effect of illegal farmland conversion on economic growth will be expanded correspondingly. In addition, the complicated and overloaded processes of administrative examination and approval, and the indifference of land management department to the “post-approval supervision” of construction land have not only induced the obviously hysteretic impact of legal farmland conversion on economic growth, but also weakened the impact of legal farmland conversion on economic growth to a certain degree. Therefore, in the short-term, illegal farmland conversion obviously has a greater impact on economic growth than legal farmland conversion. However, in the long run, illegal farmland conversion will not obtain more economic returns than legal farmland conversion. Furthermore, the results of model estimation also show that illegal farmland conversion will produce negative effect on economic growth after reaching a certain degree. So, we do not encourage illegal farmland conversion. Of course, as seen from the requirements of reducing illegal land use and promoting the healthy development of society and economy, it is still very necessary to improve related land policies. Firstly, we do not think it is definitely effective to suppress illegal farmland conversion only by implementing severe punishment measures, and this will possibly induce more short-term development behaviors, and arouse serious social conflicts and environmental problems. We need to rationally evaluate the reasonable demands of social and economic development on construction land, and legalize part of the illegal lands that truly meet land use planning and socioeconomic development demands through proper measures. This could not only promote economic growth better still, but could also avoid illegal farmland conversion and many problems arising from it effectively. Secondly, we suggest reforming the present regulatory measure of rigid annual land use plan. In the precondition of meeting land use planning, the scale of newly increased construction land (or farmland conversion area) in a certain period can be adjusted flexibly according to the change of social and economic development. It is equivalent to providing a lawful way to obtain the newly increased construction lands which would have been obtained illegally. In the long run, such a farmland conversion allocation mechanism could make greater contributions to economic growth. Last but not least, we consider that it is very important to improve current land market system and management mechanism. In particular, we suggest reducing and even cancelling the fussy procedures of administrative examination and approval, and gradually establishing an urban-rural uniform construction land market to allow and encourage free transaction of land use right. Of course, it is necessary for the government to strengthen control over land idleness and speculation, etc., in order to eliminate market failure. Acknowledgments This research was sponsored by the project of the Ministry of Science and Technology (No. 2013BAJ13B02), the National Natural Science Foundation of China (No. 41101160, 41271190), and the State Scholarship Fund of China (No. 201208320125). Special thanks are given to the reviewer and editor for their constructive comments and suggestions. References Bradshaw, K. T., & Muller, B. (1998). Impacts of rapid urban growth on farmland conversion: application of new regional land use policy models and geographical information system. Rural Sociology, 63(1), 1e25. Brueckner, J. K. (2000). Urban sprawl: diagnosis and remedies. International Regional Science Review, 23(2), 160e171.

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