Radical Urbanization and Economic Growth Quality: Evidence from Nighttime Light and FDI Flow Dynamics

This study systematically examines the impact of radical urbanization on the quality of economic growth using city-level data from 290 major prefecture-level cities in China during 2003–2019. A comprehensive indicator system for economic growth quality is constructed using PCA, capturing multiple dimensions of efficiency, stability, and sustainability. Nighttime light data obtained from the NOAA is extracted and calibrated, and the ratio of urban built-up area to nighttime light intensity is employed to measure the degree of radical urbanization. Empirical results reveal a divergence between economic quantity and quality effects: while radical urbanization promotes economic expansion, it significantly inhibits the quality of economic growth. To address potential endogeneity concerns, the change in FDI relative to changes in built-up area is used to capture FDI flow direction, with its one-period lag serving as an instrumental variable. Mechanism analysis, based on an interaction-based identification framework, shows that radical urbanization suppresses growth quality primarily through two transmission channels: reduced fiscal output efficiency and declining land use efficiency. Further analysis indicates that radical urbanization crowds out science and education expenditures, weakening fiscal effectiveness and reinforcing the identified transmission mechanisms. These findings provide objective evidence for evaluating urbanization strategies and offer policy insights for promoting quality-oriented and sustainable urban development.