Land misallocation and economic performance: evidence from China

ABSTRACT

We study the causes and consequences of land misallocation based on matched Chinese firm-level data and land transaction data during 1998–2016. We employ a land misallocation index and identify significant land misallocation in China. We find that price distortion and political incentives are associated with land misallocation. Land misallocation has important implications for economic performance. We quantify the relationship between land misallocation and productivity and find that a one standard deviation decrease in land misallocation is associated with a 14.51% decrease in labour productivity and a 10.76% reduction in total factor productivity.

KEYWORDS:

• Land misallocation
• economic performance
• price distortion
• productivity
• China

JEL CLASSIFICATION:

• R14
• R52
• O18

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

 This work was supported by National Natural Science Foundation of China (No. 72074079; No. 71774143), East China Normal University’s Recruited Talents Research Starting Project of Fundamental Research Funds for the Central Universities (2020ECNU-HLYT033).