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A Big Push of Panda from the Ground: Land Subsidy and Structural Transformation in China

Author

Listed:
  • Shawn Xiaoguang Chen

    (Business School, The University of Western Australia)

  • Yudan Cheng

    (School of Statistics and Mathematics, Central University of Finance and Economics)

  • Liutang Gong

    (Guanghua School of Management, Peking University and School of International Economics and Management, Beijing Technology and Business University)

  • Wenjia Tian

    (School of Statistics and Mathematics, Central University of Finance and Economics)

Abstract

This paper examines the role of land policies in China’s structural transformation, focusing on industrial land subsidies and their impacts on the industrial sector’s share of GDP. Drawing on the "big push" theory, we argue that these subsidies address the fixed costs of industrialization and trigger structural transformation. Additionally, we show that land subsidies may not necessarily boost industrialization due to their potential to misallocate resources and lower aggregate productivity. Using a calibrated model, our counterfactual analysis shows that China’s land subsidies contribute to a 40% difference in industrial GDP share between China and the rest of the world.

Suggested Citation

  • Shawn Xiaoguang Chen & Yudan Cheng & Liutang Gong & Wenjia Tian, 2023. "A Big Push of Panda from the Ground: Land Subsidy and Structural Transformation in China," Economics Discussion / Working Papers 23-09, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:23-09
    Note: MD5 = d98d300f8230f08ada7effdaeb494d01
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    More about this item

    Keywords

    Structural transformation; Industrialization; Industrial land subsidy; Big push;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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