Land Conversion and Misallocation Across Cities in China

37 Pages Posted: 18 Mar 2019

See all articles by Shihe Fu

Shihe Fu

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

Xiaocong Xu

Department of Economics, Clark University

Junfu Zhang

Clark University; IZA Institute of Labor Economics

Date Written: February 26, 2019

Abstract

The Chinese government has been using quotas to control the amount of farmland that can be converted for urban uses in different cities every year. Using a sample of more than 1.5 million land-lease transactions during 2007-2016, we document facts on land conversion for urban development in China. We present evidence that land conversion quotas have been increasingly misallocated across cities, in that a growing share of land conversion is occurring in less productive cities. A city-level production function is estimated for counterfactual analysis. Based on estimated parameters, we assess the economic losses from misallocation of land conversion quotas across cities in China and calculate the potential gains from reallocating land quotas to regions or cities where urban land is more productive. We also discuss policy options to improve efficiency.

Keywords: Land Conversion, Land Quota, Misallocation, Urbanization, China

JEL Classification: R12, R13, R14, R52, R58

Suggested Citation

Fu, Shihe and Xu, Xiaocong and Zhang, Junfu, Land Conversion and Misallocation Across Cities in China (February 26, 2019). Available at SSRN: https://ssrn.com/abstract=3342551 or http://dx.doi.org/10.2139/ssrn.3342551

Shihe Fu

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

A 307, Economics Building
Xiamen, Fujian 361005
China

Xiaocong Xu

Department of Economics, Clark University ( email )

950 Main Street
Worcester, MA 01610
United States

Junfu Zhang (Contact Author)

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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