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Using Land to Promote Urban Economic Growth in China

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  • Ding, Chengri
  • Lichtenberg, Erik

Abstract

This paper investigates the economic incentives for urban spatial expansion in China by estimating the value of urban land using an econometric model applied to data from the 220 largest Chinese cities for the period 1996-2003. The results are consistent with the proposition that the rapid rate of urban spatial expansion resulted from a combination of fiscal pressure on local governments and governance reforms that gave local governments greater control over land and investment policies. The estimated parameters of the model indicate that urban land generates far more than income per unit area than agriculture in eastern and central China, suggesting that local governments can profit substantially from conversion of farmland to urban use. The value of urban land in those regions increased in the period after 1999, an outcome that could be attributable to increased demand for land to accommodate economic growth, delayed development of land set aside speculatively into economic/industrial development zones, and/or implementation of stricter administrative controls on farmland conversion that restricted the supply of land for urban uses. Urban land appeared to have a low economic value in western China, a region that, taken as a whole, has lagged in terms of economic growth. The estimated parameters of the model are consistent with findings of previous studies regarding returns on foreign direct investment, domestic Chinese investment, and labor productivity.

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Bibliographic Info

Paper provided by University of Maryland, Department of Agricultural and Resource Economics in its series Working Papers with number 36748.

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Date of creation: 2008
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Handle: RePEc:ags:umdrwp:36748

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Keywords: International Development; Land Economics/Use;

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  1. Li, Hongbin & Zhou, Li-An, 2005. "Political turnover and economic performance: the incentive role of personnel control in China," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1743-1762, September.
  2. Zhihua Zhang & Jorge Martinez-Vazquez, 2003. "The System of Equalization Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
  4. F Wu, 1998. "Polycentric urban development and land-use change in a transitional economy: the case of Guangzhou," Environment and Planning A, Pion Ltd, London, vol. 30(6), pages 1077-1100, June.
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