Does public investment spur the land market? New evidence from transport improvement in Beijing

Over 140 billion RMB (1GBP=10RMB) has been spent between 2000 and 2012 in Beijing on the construction of new rail transit lines. Such massive investment allows me to examine the consequences of local public goods improvements for land prices near new stations. Conventional hedonic techniques for estimating amenity values mask the changing nature of geographical links between land parcels and stations induced by rail transit expansions. This analysis, illustrated with estimates using rich micro-geographical data from Beijingís emerging land market, has three important implications. First, it improves on the previous difference-in-difference methods by providing a framework that not only exploits changes in the parcel-station distances that happen when new stations are opened, it also highlights the importance of price changes in planned station areas. Second, it documents that the station proximity impacts on residential and commercial land prices generally decay with distance in heterogeneous non-linear trends. Thus this study clarifies the importance of conceptualizing amenity values not just in terms of its structural characteristics but how those characteristics interact with or are conditioned by local socio-demographics, and other location-specific characteristics. Finally, beyond an obvious academic interest, the question of whether rail transit improvement has a substantial affect on land values has tremendous policy implications: showing complementary effects between public investment and private sector investment. However, if this is the case in the BRICS countries? My paper presents the first attempt to show that residential and commercial land parcels that receive increased station proximity experience appreciable price premiums, but the relative importance of such benefits varies over space. At the minimum, these results suggest that public investment did spur the spatially targeted land market.