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Public land leasing, public productive spending and economic growth in Chinese cities

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  • Gao, Huina

Abstract

Land leasing revenue has been successfully used as a municipal financing tool to support public infrastructure investments which may drive economic growth. This study first constructs a growth model to investigate the correlation among land leasing revenue, infrastructure development and economic growth, and finds that with higher land-capital more land leasing revenue could directly accelerate economic growth and land leasing revenue could also indirectly slow economic growth by increasing public productive investment if the government size is large. Then we empirically testified these results using 280 cities' panel dataset, and it confirmed our theoretical results. The regression results show that increase of land leasing revenue will directly speed up economic growth, while the economic growth will increase by 0.2% with 1% increase of land leasing revenue; land leasing revenue, on the other side, successfully used as a municipal financing tool to sustain public infrastructure investments, indirectly hampers economic growth, where the indirect negative effect is -0.14. Our study contributes to better understanding of the special role of land leasing revenue in local economic growth.

Suggested Citation

  • Gao, Huina, 2019. "Public land leasing, public productive spending and economic growth in Chinese cities," Land Use Policy, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:lauspo:v:88:y:2019:i:c:s0264837718317010
    DOI: 10.1016/j.landusepol.2019.104076
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