Government Intervention in Land Markets: The Role of Industrial Policies in Shaping Land Use Costs

Kaishun Li and Kaiming Li

Australian Economic Papers, 2025, vol. 64, issue 2, 267-278

Abstract: Industrial policies influence national economic development by allocating industrial land resources. Unlike the market‐oriented industrial land transaction systems in developed countries, China's industrial land transactions are significantly influenced by governmental intervention. However, there is insufficient research on the extent and mechanisms of industrial policy's influence on land use costs in this context. Therefore, this study combines land transactions, industrial policy, urban statistics, and listed company data, creating a dataset of 9705 land transactions from 2011 to 2020 to analyze industrial policies' impact on land use costs. The findings are as follows: First, different industrial policies have differentiated effects on land use costs, with lower costs for key industries and higher costs for heavily polluting industries. Second, the impact is more pronounced when the land parcel is situated outside the development zone, transferred by the prefecture‐level city government, and the proportion of the tertiary industry in the province is relatively low. Third, local governments achieve regulation of land use costs through industrial policies by employing listing method and transferring land to state‐owned enterprises. Furthermore, subsequent investigations reveal that industrial policies can mitigate the decline in total factor productivity caused by increased land use costs for enterprises. This article holds significant implications for optimizing industrial land resource allocation and facilitating industrial transformation and upgrading in developing countries.

Date: 2025
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