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"Race to the Bottom" Competition by Negotiated Land Leasing: an institutional analysis and empirical evidence from Chinese cities

Author

Listed:
  • Ran Tao

    (Center for Chinese Agricultural Policy, Chinese Academy of Sciences
    China Economy and Management Academy, Central University of Economics and Finance)

  • Fei Yuan

    (Center for Chinese Agricultural Policy, Chinese Academy of Sciences)

  • Mingxing Liu

    (China Institute for Education Finance Research, Peking University
    China Economy and Management Academy, Central University of Economics and Finance)

  • Heng-fu Zou

    (China Economy and Management Academy, Central University of Economics and Finance
    Development and Research Group, the World Bank)

Abstract

By analyzing the evolution of local governments' roles in different periods of China's growth in transition, this paper explores local fiscal incentives to use subsidized land and infrastructure as a key instrument in regional competition for manufacturing investment after the mid-1990s. We relate local land development behavior to China's current land use institutions and inter-governmental arrangements. On the basis of a panel data covering prefectural-level city from 1999 to 2003, we empirically identify and compare the fiscal impacts of different forms of land leasing (by negotiation versus by auction/tender). Policy implications are drawn from this analysis to further reform China's urban land system and fiscal institutions.

Suggested Citation

  • Ran Tao & Fei Yuan & Mingxing Liu & Heng-fu Zou, 2007. ""Race to the Bottom" Competition by Negotiated Land Leasing: an institutional analysis and empirical evidence from Chinese cities," CEMA Working Papers 294, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:294
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    References listed on IDEAS

    as
    1. Wellisch,Dietmar, 2000. "Theory of Public Finance in a Federal State," Cambridge Books, Cambridge University Press, number 9780521630351.
    2. Park, Albert & Shen, Minggao, 2003. "Joint liability lending and the rise and fall of China's township and village enterprises," Journal of Development Economics, Elsevier, vol. 71(2), pages 497-531, August.
    3. World Bank, 2002. "China - National Development and Sub-National Finance : A Review of Provincial Expenditures," World Bank Other Operational Studies 15423, The World Bank.
    4. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
    5. Li, Hongbin & Zhou, Li-An, 2005. "Political turnover and economic performance: the incentive role of personnel control in China," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1743-1762, September.
    6. Litwack, John M. & Qian, Yingyi, 1998. "Balanced or Unbalanced Development: Special Economic Zones as Catalysts for Transition," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 117-141, March.
    7. Jiahua Che & Yingyi Qian, 1998. "Insecure Property Rights and Government Ownership of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 467-496.
    8. Li, Shaomin & Li, Shuhe & Zhang, Weiying, 2000. "The Road to Capitalism: Competition and Institutional Change in China," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 269-292, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    race to bottom competition; land leasing by negotiation; tax sharing system; local fiscal incentives; China's growth in transition;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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