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Empirical study of the local government deficit, land finance and real estate markets in China

Author

Listed:
  • Pan, Jiun-Nan
  • Huang, Jr-Tsung
  • Chiang, Tsun-Feng

Abstract

The purpose of this study is to explore an important issue concerning the relationship among the local government deficit, land finance and real estate markets in China. This study uses a panel data of 30 provinces in China during 1999–2010 to estimate the panel smooth transition regression model. Since the estimated transition threshold value is 14.62, provinces with the ratio of fiscal deficits to GDP of greater than 14.62% are categorized as in the high fiscal difficulty (HFD) regime. Otherwise they are in the low fiscal difficulty (LFD) regime. The primary finding of this study is that the land leasing fee has a significantly positive influence on the total value of commodity buildings sold in the LFD regime. In addition, the local fiscal deficit has a significantly positive impact on the real estate market in the LFD regime, but this impact turns to be negative in the HFD regime.

Suggested Citation

  • Pan, Jiun-Nan & Huang, Jr-Tsung & Chiang, Tsun-Feng, 2015. "Empirical study of the local government deficit, land finance and real estate markets in China," China Economic Review, Elsevier, vol. 32(C), pages 57-67.
  • Handle: RePEc:eee:chieco:v:32:y:2015:i:c:p:57-67
    DOI: 10.1016/j.chieco.2014.11.003
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    References listed on IDEAS

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    Cited by:

    1. Deininger,Klaus W. & Jin,Songqing & Liu,Shouying & Shao,Ting & Xia,Fang, 2015. "Impact of property rights reform to support China?s rural-urban integration : village-level evidence from the Chengdu national experiment," Policy Research Working Paper Series 7389, The World Bank.
    2. Deininger, Klaus & Jin, Songqing & Liu, Shouying & Xia, Fang, 2015. "Household-level impacts of property rights reform in peri-urban China: Evidence from the Chengdu National Experiment," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205753, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    3. Deininger,Klaus W. & Jin,Songqing & Liu,Shouying & Xia,Fang, 2015. "Impact of property rights reform to support China?s rural-urban integration : household-level evidence from the Chengdu national experiment," Policy Research Working Paper Series 7388, The World Bank.
    4. Xianwei Fan & Dan Zheng & Minjun Shi, 2016. "How Does Land Development Promote China’s Urban Economic Growth? The Mediating Effect of Public Infrastructure," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-12, March.
    5. 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.
    6. Feng, Juan & Lichtenberg, Erik & Ding, Chengri, 2015. "Balancing act: Economic incentives, administrative restrictions, and urban land expansion in China," China Economic Review, Elsevier, vol. 36(C), pages 184-197.
    7. repec:gam:jsusta:v:8:y:2016:i:3:p:279:d:65950 is not listed on IDEAS
    8. Joshua Hall & Yang Zhou, 2017. "The Sinuous Dragon: Economic Freedom and Economic Growth in China," Working Papers 17-12, Department of Economics, West Virginia University.
    9. repec:gam:jsusta:v:9:y:2017:i:11:p:2011-:d:117440 is not listed on IDEAS
    10. repec:eee:regeco:v:67:y:2017:i:c:p:1-10 is not listed on IDEAS

    More about this item

    Keywords

    Local government deficit; Land finance; Real estate; China; Panel smooth transition regression model;

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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