Does urbanization intensify land finance? Evidence from the county-to-district policy in China

ABSTRACT

Land finance is one of the economic phenomena in the process of urbanization in China. Studying the impact of urbanization on land finance may help us to better formulate urbanization policies, especially for developing countries. We use the microdata of urban land transactions in China from 2005 to 2016 and adopt a differences-in-differences method based on the county-to-district policy to investigate the impact of urbanization on land finance. We find that the urbanization reform has significantly increased the local government’s reliance on land finance. We also find that the policy has a larger impact on land finance for undeveloped cities. Land finance provides a critical source of funds for the urbanization led by local governments, but with the further promotion of urbanization, the reliance on land finance by local governments will show a gradual downward trend. The mechanism test finds that urbanization promotes land finance dependence by increasing the transfer revenue and areas of existing construction land and infrastructure construction investment. The study of the impact of China’s urbanization on land finance can serve as a reference for other developing countries’ urbanization, and can further provide practical guidance for the promotion of China’s new-type urbanization.

KEYWORDS:

• Urbanization
• county-to-district reform
• land finance
• China

JEL CODES:

• O18
• H27
• Q15

Data availability statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.

Disclosure statement

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

Notes

¹ Calculated based on the data from the National Bureau of Statistics of China.

² China’s National Development and Reform Commission put forward the “National New-type Urbanization Plan (2014–2020)”, which tries to make China’s urbanization policy more people-oriented. New urbanization is an intensive and efficient, urban and rural integration, harmonious and sustainable urbanization model, rather than just a simple land expansion type of urbanization (Guan et al. 2018).

³ http://www.xzqh.org

⁴ http://www.gov.cn/

⁵ http://www.mof.gov.cn/

⁶ https://www.landchina.com/.

⁷ http://www.gtarsc.com/#/index.

⁸ The results from the full sample reach the same results, the results are available upon request.

⁹ This institute assesses China’s prefecture-level cities according to five dimensions: concentration of business resources, urban hubs, urban population activity, lifestyle diversity, and future plasticity. In 2020, there are 19 first-tier cities and 30 second-tier cities.

¹⁰ The first-tier cities in our sample include Guangzhou, Shenzhen, Chengdu, Hangzhou, Wuhan, Xi’an, Suzhou, Nanjing, Changsha, Zhengzhou, Dongguan, Qingdao, Shenyang, Ningbo, and Kunming; the second-tier cities in our sample include Wuxi, Jinan, Nanchang, Huizhou, Haikou, Foshan, Wenzhou, Jinhua, Zhuhai, Yangzhou, Hefei, Nanning, Changzhou, Zhongshan, Dalian, Changchun, Nantong, Taizhou, Fuzhou, Quanzhou, Jiaxing, Yantai, Xiamen, Shijiazhuang, Taiyuan, Lanzhou, Harbin, Guiyang, Xuzhou, and Shaoxing.

Additional information

Funding

This study was supported by the National Natural Science Foundation of China (41971336) and the National key research and development program of China (2018YFD1100801), and supported by the Fundamental Research Funds for the Central Universities (2722022BY006)