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Place-based Land Policy and Spatial Misallocation: Theory and Evidence from China

Author

Listed:
  • Min Fang
  • Libin Han
  • Zibin Huang
  • Ming Lu
  • Li Zhang

Abstract

Place-based land policies may create spatial misallocation. We investigate a major policy in China that aims to reduce regional development gaps by distributing more urban construction land quotas to underdeveloped inland regions. We first show causal evidence that this policy decreased firm-level TFP in more developed eastern regions relative to inland regions. We then build a spatial equilibrium model with migration, land constraints, and agglomeration. The model reveals that this policy led to substantial losses in national TFP and output. It shrinks regional output gap but lowers incomes of workers from underdeveloped regions by hindering their migration to developed regions.

Suggested Citation

  • Min Fang & Libin Han & Zibin Huang & Ming Lu & Li Zhang, 2022. "Place-based Land Policy and Spatial Misallocation: Theory and Evidence from China," Working Papers tecipa-729, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-729
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    More about this item

    Keywords

    Place-based Policy; Land Policy; Spatial Misallocation; Regional Inequality; China;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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