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Modelling the city choices of real estate developers in China

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  • Chu, Jun
  • Tong, De
  • Wu, Hanshuangjie
  • Zhang, Yihao

Abstract

Real estate developers act as “city builders”, significantly driving urban and regional development. However, there has been a notable lack of quantitative analysis exploring how these developers make location choices among different cities, particularly in relation to formal and informal institutions. Grounded in the framework of “new institutionalism,” this paper models the city choice processes employed by real estate developers. We constructed a database of land purchases made by 58 publicly listed real estate developers across 290 cities in China, utilizing the Heckman model to analyze the influence of both formal and informal institutions. Our findings reveal that, with respect to formal institutions, a higher degree of marketization and decentralization leads to an increase in the scale of land purchases. In terms of informal institutions, developers with stronger local trust and more robust political connections are more likely to pursue larger residential development projects across various cities. Additionally, we observe substitution effects between political connections and marketization, as well as between local trust and marketization. This paper enhances our understanding of the nexus between real estate developers' behavior and institutional structures, providing valuable insights into the mechanisms of urban development in China.

Suggested Citation

  • Chu, Jun & Tong, De & Wu, Hanshuangjie & Zhang, Yihao, 2026. "Modelling the city choices of real estate developers in China," Land Use Policy, Elsevier, vol. 167(C).
    • Handle: RePEc:eee:lauspo:v:167:y:2026:i:c:s0264837726001353
    DOI: 10.1016/j.landusepol.2026.108051
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