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Government Land Regulations and Housing Supply Elasticity in Urban China

Wenbin Huang

China & World Economy, 2022, vol. 30, issue 4, 122-148

Abstract: This paper studies the effects of government land regulations (GLR) on housing supply elasticity in urban China. We first extend the theoretical framework of Saiz (2010), then use land transaction microdata, satellite‐generated data, and the construction of instrumental variables to analyze the marginal effect of GLR, and finally calculate the housing supply elasticity caused by GLR. Our analysis finds that GLR is an important reason for the overall inelasticity of housing supply in 272 Chinese cities, which reduces housing supply elasticity from 1.457 (elastic) to 0.872 (inelastic). Housing supply elasticity caused by GLR has declined the most in first‐tier cities and the eastern regions. The marginal effect of land use regulation is greater than that of land allocation and supply regulations. The initial development level and natural geographic constraint of each city also matter in China's housing supply market.

Date: 2022
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