Land Allocation and Industrial Agglomeration: Evidence from the 2007 Reform in China

74 Pages Posted: 31 Oct 2023

See all articles by Qinghua Zhang

Qinghua Zhang

Peking University - Guanghua School of Management

Zhi Wang

China Center for Economic Studies, Fudan University

Wenjia Tian

Central University of Finance and Economics (CUFE)

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Abstract

This paper highlights the crucial role of land allocation mechanisms in promoting industrial agglomeration by examining China’s 2007 industrial land market reform. By introducing transparency into the land-selling process, the reform facilitated more buyers to compete for land (reflected by increased land sale prices), enabling local governments to allocate land to the most suitable users. Combining comprehensive data sets that include information on initial local industrial structure, new industrial establishments, and industrial land transactions, the empirical analysis finds that the reform significantly increased the entry of firms from industries aligned with local specialization, particularly in areas that implemented the reform more strictly. A back-of-the-envelope calculation indicates a 1.3% increase in the national average total factor productivity of new entrants over three years post-reform due to a better match between new entrants and local industry specialization. Supporting evidence demonstrates the reform’s positive effect on economic growth reflected in  nighttime lights growth.

Keywords: Land allocation mechanism, Transparency, industrial agglomeration, Spatial distribution of new entrants, China

Suggested Citation

Zhang, Qinghua and Wang, Zhi and Tian, Wenjia, Land Allocation and Industrial Agglomeration: Evidence from the 2007 Reform in China. Available at SSRN: https://ssrn.com/abstract=4618532 or http://dx.doi.org/10.2139/ssrn.4618532

Qinghua Zhang (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Zhi Wang

China Center for Economic Studies, Fudan University ( email )

600 GuoQuan Road
Shanghai, 200433
China

Wenjia Tian

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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