Can Price Regulation Increase Land-Use Intensity? Evidence from China’s Industrial Land Market

Abstract

A major part of the literature on land use regulations focuses on the residential land market. In this paper, we examine the impact of the minimum price policy on the large, but understudied, industrial land market in China. The minimum price policy aims to reduce wasteful land use in the industrial market that results from low transaction prices; it varies across counties or districts. We show that this policy increases the overall land-use intensity in the industrial market: for each additional 100 yuan increase in imposed minimum prices, the unit transaction prices range from 31.4 to 59.7 yuan higher, and the output and total factor productivity of new entrants range from 11.8% to 16.1% higher, respectively. Furthermore, we provide suggestive evidence that higher minimum prices reduce the likelihood of land lying unused post transactions, which has the effect of increasing the industrial output per unit of land.

Keywords: Land Use Regulation; Industrial Land; Minimum Price; China

JEL Classification: R52, L5, P42, O53