An econometric study of the decisions of a town planning authority: complementary & substitute uses of industrial activities in Hong Kong

Abstract

This is a contribution to the research on the interface between urban economics and urban planning at the micro level on the one hand and economic development at the macro level on the other hand by a study of the relationship between the performance of the development application mechanism and economic development. This study is conducted in the light that neither urban economics nor urban planning research has utilized useful development control information that can help better understand the spatial and linkage aspects of the industrial sector in economic development. A probit study of a relatively large population of statistics (with 1728 observations) concerning planning applications for uses in lands under industrial zoning in Hong Kong is conducted in terms of 5 refutable hypotheses about the role of the planning authority in respect of land uses that are neutral to, complementary to and substitutes of industrial uses in a local context where major structural changes are occurring in the economy. The hypotheses are derived from standard price theory. The test discovers that, consistent with the theory of substitute goods, that the probabilities of mixed industrial/office and pure office uses in industrial zones being approved were dependent on the rise and fall of the manufacturing sector (measured in terms of labor share). However, those for ancillary office use, a use that theoretically should be complementary to industrial activities, were independent of the state of the manufacturing sector. Copyright © 2002 John Wiley & Sons, Ltd.