Limits of Land Capitalization and Its Economic Effects: Evidence from China

Jian Cheng, Jiangmeng Zhao, Daolin Zhu and Hui Zhang
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Jian Cheng: College of Land Science and Technology, China Agricultural University, Beijing 100193, China
Jiangmeng Zhao: College of Land Science and Technology, China Agricultural University, Beijing 100193, China
Daolin Zhu: College of Land Science and Technology, China Agricultural University, Beijing 100193, China
Hui Zhang: College of Land Science and Technology, China Agricultural University, Beijing 100193, China

Land, 2021, vol. 10, issue 12, 1-19

Abstract: Academic debates over the advantages and disadvantages of land capitalization are ongoing in China, but the fundamental issues behind the debate have not been adequately explored. We suggest that the core issue in land capitalization is the degree of capitalization. This study first theoretically deduced the existence of land capitalization limits; then, we used panel data from 35 key cities to conduct an empirical test, and finally we analyzed the current risk of excessive land capitalization in China. The results indicated that the mutual restriction of multiple land attributes determined the limits of land capitalization. Therefore, land capitalization has been categorized into two types—moderate and excessive—which produce different economic effects. The degree of land capitalization and real economic growth showed a significant inverted-U relationship, and the turning point appeared when the land capital value reached 2.5 times the land factor value. According to this threshold, we can infer that many key cities have been overcapitalized, which may lead to an economic recession and affect the growth prospects of China’s economy. Further analysis indicated that excessive land capitalization could be related to the unique Chinese style of decentralization. These conclusions have important policy implications for the reform of land marketization in countries undergoing economic transition. The goal of land reform is to allow the market mechanism to play a major role in land resource allocation, but the excessive capitalization of land must be prevented.

Keywords: land economics; land capitalization; real economic growth; limit; land system reform; China (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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