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Impact fees and real estate prices: evidence from 35 Chinese cities

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  • Dong, Xiaofang
  • Fu, Shihe
  • Yuan, Yufei

Abstract

Local governments often charge developers impact fees to finance local public goods. This has been practiced in Chinese cities for more than two decades; however, no empirical studies have tested the effect of impact fees on real estate prices. Using a panel data set for 35 large- and medium-sized cities from 1998 to 2008, we find that impact fees lead to a significant increase in real estate prices. For a given city, an increase in impact fees by one yuan leads to an increase of about 5 yuan in the price of newly-built housing; a 1% increase in impact fees leads to an increase of 5 percentage points in the housing price index and 7 percentage points in the land price index.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48047.

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Date of creation: 01 Jun 2012
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Publication status: Published in Frontiers of Economics in China 2.8(2013): pp. 207-219
Handle: RePEc:pra:mprapa:48047

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Keywords: impact fee; real estate price; local public finance;

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  1. Wang, Songtao & Yang, Zan & Liu, Hongyu, 2011. "Impact of urban economic openness on real estate prices: Evidence from thirty-five cities in China," China Economic Review, Elsevier, Elsevier, vol. 22(1), pages 42-54, March.
  2. Gyourko, Joseph, 1991. "Impact fees, exclusionary zoning, and the density of new development," Journal of Urban Economics, Elsevier, vol. 30(2), pages 242-256, September.
  3. Yinger, John, 1998. "The Incidence of Development Fees and Special Assessments," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 23-41, March.
  4. Jing Wu & Joseph Gyourko & Yongheng Deng, 2010. "Evaluating Conditions in Major Chinese Housing Markets," NBER Working Papers 16189, National Bureau of Economic Research, Inc.
  5. Jennifer S. Evans-Cowley & Fred A. Forgey & Ronald C. Rutherford, 2005. "The Effect of Development Impact Fees on Land Values," Growth and Change, Gatton College of Business and Economics, University of Kentucky, Gatton College of Business and Economics, University of Kentucky, vol. 36(1), pages 100-112.
  6. Ran Tao & Fubing Su & Mingxing Liu & Guangzhong Cao, 2010. "Land Leasing and Local Public Finance in China’s Regional Development: Evidence from Prefecture-level Cities," Urban Studies, Urban Studies Journal Limited, Urban Studies Journal Limited, vol. 47(10), pages 2217-2236, September.
  7. Ren, Yu & Xiong, Cong & Yuan, Yufei, 2012. "House price bubbles in China," China Economic Review, Elsevier, Elsevier, vol. 23(4), pages 786-800.
  8. Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 34(6), pages 639-661, November.
  9. Burge, Gregory & Ihlanfeldt, Keith, 2009. "Development impact fees and employment," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(1), pages 54-62, January.
  10. Brueckner, Jan K., 1997. "Infrastructure financing and urban development:: The economics of impact fees," Journal of Public Economics, Elsevier, Elsevier, vol. 66(3), pages 383-407, December.
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