Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits

35 Pages Posted: 5 May 2016

See all articles by Jan K. Brueckner

Jan K. Brueckner

University of California, Irvine - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Shihe Fu

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE)

Yizhen Gu

Jinan University

Junfu Zhang

Clark University; IZA Institute of Labor Economics

Date Written: April 19, 2016

Abstract

This paper develops a new approach for measuring the stringency of a major form of land-use regulation, building-height restrictions, and it applies the method to an extraordinary dataset of land-lease transactions from China. Our theory shows that the elasticity of land price with respect to the oor-area ratio (FAR), an indicator of the allowed building height for the parcel, is a measure of the regulation’s stringency (the extent to which FAR is kept below the free-market level). Using a national sample, estimation that allows this elasticity to be city-specific shows substantial variation in the stringency of FAR regulation across Chinese cities, and additional evidence suggests that stringency depends on certain city characteristics in a predictable fashion. Single-city estimation for the large Beijing subsample, where site characteristics can be added to the regression, indicates that the stringency of FAR regulation varies with certain site characteristics, again in a predictable way (being high near the Tiananmen historical sites). Further results using a different dataset show that FAR limits in Beijing are adjusted in response to demand forces created by new subway stops.

Keywords: floor-area ratio, density restriction, urban development, China

JEL Classification: R140, R520

Suggested Citation

Brueckner, Jan K. and Fu, Shihe and Gu, Yizhen and Zhang, Junfu, Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits (April 19, 2016). CESifo Working Paper Series No. 5855. Available at SSRN: https://ssrn.com/abstract=2774669

Jan K. Brueckner (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Shihe Fu

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 361005
China

Yizhen Gu

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Junfu Zhang

Clark University ( email )

950 Main Street
Worcester, MA 01610
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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