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Government policy and land price dynamics: A quantitative assessment of China’s factor market reforms

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  • Bhatt, Vipul
  • Liao, Mouhua
  • Zhao, Min Qiang

Abstract

This paper examines the role played by government policy regarding factors of production in shaping the dynamics of a growing economy. Using land as an example of an important productive factor, we develop a quantitative model with endogenous land price policy regimes to incorporate the regime switch observed in China from dual-track land pricing to land price discrimination by use. Our model also captures the following three economic reforms in China: introduction of non-SOEs (state-owned enterprises); reform of SOEs characterized by their retreat from the competitive manufacturing sector and the establishment of state monopolies in factor markets around 2000. We calibrate our model to match key economic indicators for China and quantify the effects of these reforms. Our calibrated model is consistent with several stylized facts for China after 2000 such as widening disparity in land prices by use, rapid growth in housing price, land revenue, and government expenditures on public goods, and the steep decline in labor share for income.

Suggested Citation

  • Bhatt, Vipul & Liao, Mouhua & Zhao, Min Qiang, 2023. "Government policy and land price dynamics: A quantitative assessment of China’s factor market reforms," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:regeco:v:98:y:2023:i:c:s0166046222000928
    DOI: 10.1016/j.regsciurbeco.2022.103854
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    More about this item

    Keywords

    Land price policy; Dual-track pricing; Land price discrimination; State monopoly; Land market reforms;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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