Deregulating the input market by central inspection: Lessons from China's primary land market

Dongmin Kong, Yanan Wang and Naide Ye

Journal of Economic Behavior & Organization, 2024, vol. 220, issue C, 732-755

Abstract: Leveraging a reform that assigns central inspectorates to local units in China to oversee industrial land transactions, this study examines the effects of unleashing the local government's influence on land prices using a difference-in-differences design. Our research provides compelling evidence that the reform leads to an additional 50% increase in industrial land prices and significantly enhances the productivity of local industrial firms. The rise in land prices can be attributed to an increase in market-oriented transactions. Additionally, we discover an improvement in the quality of new entrants and a reduction in resource misallocation following the reform. By demonstrating the positive externalities of central supervision on local government intervention in the industrial land market, our findings suggest that, in certain cases, central inspection can mitigate distorting behaviors of the local government in input markets. This, in turn, facilitates the screening of productive entrants and hinders investments by unproductive incumbents, thereby improving the overall productivity of economic entities.

Keywords: The helping hand; Local government; Land prices; Misallocation; Firm productivity (search for similar items in EconPapers)
JEL-codes: D24 G31 G38 H23 R52 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:220:y:2024:i:c:p:732-755

DOI: 10.1016/j.jebo.2024.02.039

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