IDEAS home Printed from https://ideas.repec.org/a/eee/lauspo/v99y2020ics0264837720308644.html
   My bibliography  Save this article

Informal government preferences and asymmetric land allocation in China

Author

Listed:
  • Wu, Shuping
  • Yang, Zan

Abstract

Whether governments have informal preferences toward firms when allocating land resources and the effects of such preferences on regional development remain unclear, particularly in countries with weak formal institutions. This paper investigates the government’s informal preferences in land allocations in China. Substantial evidence is found that politically connected firms are preferred to win land auctions at lower prices due to two different reasons. These preferences are informally achieved through a two-stage auction mechanism rather than formal bid preference programs, and result in the asymmetrical allocation of urban land in terms of land quality, quantity, and price, across politically and non-politically connected firms in China. The state-owned enterprises are allocated poor quality land parcels at 55% land price discounts. In comparison, the manager-based politically connected firms are allocated regular land parcels at 6% price discounts, and other firms without connections with the government are allocated regular land at higher prices.

Suggested Citation

  • Wu, Shuping & Yang, Zan, 2020. "Informal government preferences and asymmetric land allocation in China," Land Use Policy, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:lauspo:v:99:y:2020:i:c:s0264837720308644
    DOI: 10.1016/j.landusepol.2020.105085
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264837720308644
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.landusepol.2020.105085?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    2. Chong-en Bai & Chang-Tai Hsieh & Zheng Song, 2020. "Special Deals with Chinese Characteristics," NBER Macroeconomics Annual, University of Chicago Press, vol. 34(1), pages 341-379.
    3. Li, L. & Bao, Helen X.H. & Robinson, Guy M., 2020. "The return of state control and its impact on land market efficiency in urban China," Land Use Policy, Elsevier, vol. 99(C).
    4. Rose-Ackerman,Susan & Palifka,Bonnie J., 2016. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9781107441095.
    5. Susan Athey & Dominic Coey & Jonathan Levin, 2013. "Set-Asides and Subsidies in Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 1-27, February.
    6. Lance Brannman & Luke M. Froeb, 2000. "Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 283-290, May.
    7. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-392, June.
    8. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    9. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 995-1025.
    10. Zan Yang & Ying Fan & Song Shi & Jing Liao, 2018. "Political Connections and Corporate Borrowing: an Analysis on the Listed Real Estate Firms in China," The Journal of Real Estate Finance and Economics, Springer, vol. 57(3), pages 315-350, October.
    11. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
    12. Yuen Leng Chow & Isa E. Hafalir & Abdullah Yavas, 2015. "Auction versus Negotiated Sale: Evidence from Real Estate Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 432-470, June.
    13. Rose-Ackerman,Susan & Palifka,Bonnie J., 2016. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9781107081208.
    14. Hongbin Cai & Hanming Fang & Lixin Colin Xu, 2011. "Eat, Drink, Firms, Government: An Investigation of Corruption from the Entertainment and Travel Costs of Chinese Firms," Journal of Law and Economics, University of Chicago Press, vol. 54(1), pages 55-78.
    15. Jiang Xu & Anthony Yeh & Fulong Wu, 2009. "Land Commodification: New Land Development and Politics in China since the Late 1990s," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 33(4), pages 890-913, December.
    16. Wu, Jing & Gyourko, Joseph & Deng, Yongheng, 2015. "Real estate collateral value and investment: The case of China," Journal of Urban Economics, Elsevier, vol. 86(C), pages 43-53.
    17. Lin, Justin Yifu & Cai, Fang & Li, Zhou, 1998. "Competition, Policy Burdens, and State-Owned Enterprise Reform," American Economic Review, American Economic Association, vol. 88(2), pages 422-427, May.
    18. Chong-En Bai & Jiangyong Lu & Zhigang Tao, 2006. "The Multitask Theory of State Enterprise Reform: Empirical Evidence from China," American Economic Review, American Economic Association, vol. 96(2), pages 353-357, May.
    19. Wang, Yuan & Hui, Eddie Chi-man, 2017. "Are local governments maximizing land revenue? Evidence from China," China Economic Review, Elsevier, vol. 43(C), pages 196-215.
    20. Marion, Justin, 2007. "Are bid preferences benign? The effect of small business subsidies in highway procurement auctions," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1591-1624, August.
    21. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhou, Tianxiao & Tan, Rong & Shu, Xianfan, 2022. "Rigidity with partial elasticity: Local government adaptation under the centralized land quota system in China," Land Use Policy, Elsevier, vol. 118(C).
    2. Liu, Yajie & Cui, Lijuan & Xiong, Yanyan & Yao, Xianguo, 2023. "Does the development of the Internet improve the allocative efficiency of production factors? Evidence from surveys of Chinese manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 161-174.
    3. Lu, Shenghua & Wang, Hui, 2023. "How revolving-door recruitment makes firms stand out in land market: Evidence from China," China Economic Review, Elsevier, vol. 78(C).
    4. Changjun Jiang & Jintao Li, 2022. "Influence of the Market Supply of Construction Land on the Misallocation of Labor Resources: Empirical Evidence from China," Land, MDPI, vol. 11(10), pages 1-18, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jin, Xuejun & Chen, Zhenhao & Luo, Deming, 2019. "Anti-corruption, political connections and corporate responses: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    2. Chen, Shimin & Sun, Zheng & Tang, Song & Wu, Donghui, 2011. "Government intervention and investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 259-271, April.
    3. Feng, Xunan & Johansson, Anders C. & Zhang, Tianyu, 2015. "Mixing business with politics: Political participation by entrepreneurs in China," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 220-235.
    4. Cull, Robert & Li, Wei & Sun, Bo & Xu, Lixin Colin, 2015. "Government connections and financial constraints: Evidence from a large representative sample of Chinese firms," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 271-294.
    5. Shi, Xiangyu & Xi, Tianyang & Zhang, Xiaobo & Zhang, Yifan, 2021. "“Moving Umbrella”: Bureaucratic transfers and the comovement of interregional investments in China," Journal of Development Economics, Elsevier, vol. 153(C).
    6. Anders C. Johansson & Xunan Feng, 2016. "The state advances, the private sector retreats? Firm effects of China’s great stimulus programme," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1635-1668.
    7. Ren, Haohan & Zhao, Xiaofeng, 2020. "Anticorruption, political connections, and corporate cash policy: Evidence from politician downfalls in China," Emerging Markets Review, Elsevier, vol. 45(C).
    8. Tang, Xuesong & Lin, Yan & Peng, Qing & Du, Jun & Chan, Kam C., 2016. "Politically connected directors and firm value: Evidence from forced resignations in China," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 148-167.
    9. Jiang, Haiyan & Hu, Yuanyuan & Zhang, Honghui & Zhou, Donghua, 2018. "Benefits of Downward Earnings Management and Political Connection: Evidence from Government Subsidy and Market Pricing," The International Journal of Accounting, Elsevier, vol. 53(4), pages 255-273.
    10. José Alcalde & Matthias Dahm, "undated". "Supplier Diversity before the Time of Cholera," Discussion Papers in Economics 20/07, Division of Economics, School of Business, University of Leicester.
    11. Jian Zhang, 2018. "Public Governance and Corporate Fraud: Evidence from the Recent Anti-corruption Campaign in China," Journal of Business Ethics, Springer, vol. 148(2), pages 375-396, March.
    12. Cheng, Lei, 2022. "Political capital and physical capital: Substitute or complement? Evidence from China's anti-corruption campaign," Emerging Markets Review, Elsevier, vol. 51(PB).
    13. Bai, Tao & Chen, Stephen & Xu, Youzong, 2021. "Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China," International Business Review, Elsevier, vol. 30(5).
    14. Ronald S. Burt & Sonja Opper, 2020. "Political Connection and Disconnection: Still a Success Factor for Chinese Entrepreneurs," Entrepreneurship Theory and Practice, , vol. 44(6), pages 1199-1228, November.
    15. repec:zbw:bofitp:2020_020 is not listed on IDEAS
    16. Zou, Na, 2020. "Anticorruption efforts and corporate fraud," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224619, Verein für Socialpolitik / German Economic Association.
    17. Ms. Anja Baum & Clay Hackney & Mr. Paulo A Medas & Mouhamadou Sy, 2019. "Governance and State-Owned Enterprises: How Costly is Corruption?," IMF Working Papers 2019/253, International Monetary Fund.
    18. Xu, Shen & Yin, Bichao & Lou, Chunjie, 2022. "Minority shareholder activism and corporate social responsibility," Economic Modelling, Elsevier, vol. 116(C).
    19. Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2018. "Design of public procurement auctions: evidence from cleaning contracts," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 398-426, June.
    20. Saibal Ghosh, 2023. "Political connections and bank behaviour," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 52(1), February.
    21. Dang, Vinh Q.T. & Otchere, Isaac & So, Erin P.K., 2022. "Does the nature of political connection matter for corporate social responsibility engagement? Evidence from China," Emerging Markets Review, Elsevier, vol. 52(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:lauspo:v:99:y:2020:i:c:s0264837720308644. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joice Jiang (email available below). General contact details of provider: https://www.journals.elsevier.com/land-use-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.