Abstract
On the one hand, the twin perspectives of the construction industry and urban agglomeration proliferate economic prosperity. However, on the other hand, construction activities and increased population density give rise to environmental challenges. This study is an initial attempt to explore links between the construction industry, urban agglomeration, non-renewable energy utilization, carbon dioxide emissions (CO2e), and economic output within a system of simultaneous equation modeling. This study develops modeling specifications to include the construction industry as a shifting factor and CO2e as a determinant of technical efficiency. A heterogeneous fully modified ordinary least squares (FMOLS) technique, capable of providing concrete empirical outcomes even in the presence of modern panel-data econometric issues, is utilized for the data of China’s 30 provincial/ city divisions during the 2003−2019 period. It has been revealed that: (i) the influence of urban agglomeration on the economic output was heterogeneous, with an adverse link for China’s western part, neutrality connection for the central part, and favorable for China’s eastern part; and (ii) shifting from China’s western to eastern parts, the expansion of the construction industry has a significant impact on economic output, and, hence, has been described as “the Economic Effects of Urban agglomeration” for the Chinese economy. The policies of this study have crucial lessons for global economies.