Land investment regulation and allocative efficiency: evidence from the Chinese manufacturing sector

Aidong Zhao, Huub Ploegmakers, Jan Rouwendal and Xianlei Ma

Journal of Economic Geography, 2025, vol. 25, issue 2, 151-174

Abstract: This article analyzes the role of production factor land in the production process. Using a novel dataset of 20,205 newly established firms in the Chinese manufacturing sector from 2007 to 2014, our production function estimates suggest the existence of a sizable gap (averaging 50 USD/m2) between the marginal productivity of land and its user cost. Basic economic theory suggests a possible relationship with China’s minimum investment intensity (MII) regulation. An analysis using changes in MII limits over time and the resulting discontinuities at county borders confirms that larger gaps are significantly associated with increases in MII limits. Thus, the results of this study suggest that MII regulation leads to allocative inefficiency of land.

Keywords: marginal productivity; land use regulation; misallocation; industrial land; minimum investment intensity (search for similar items in EconPapers)
JEL-codes: D22 L51 L6 Q24 R52 (search for similar items in EconPapers)
Date: 2025
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