Does urbanization intensify land finance? Evidence from the county-to-district policy in China

Lei Zhang, Senlin Wang, Zibin Liu, Yukun Sun and Xiang Zhao

Applied Economics, 2023, vol. 55, issue 19, 2189-2206

Abstract: Land finance is one of the economic phenomena in the process of urbanization in China. Studying the impact of urbanization on land finance may help us to better formulate urbanization policies, especially for developing countries. We use the microdata of urban land transactions in China from 2005 to 2016 and adopt a differences-in-differences method based on the county-to-district policy to investigate the impact of urbanization on land finance. We find that the urbanization reform has significantly increased the local government’s reliance on land finance. We also find that the policy has a larger impact on land finance for undeveloped cities. Land finance provides a critical source of funds for the urbanization led by local governments, but with the further promotion of urbanization, the reliance on land finance by local governments will show a gradual downward trend. The mechanism test finds that urbanization promotes land finance dependence by increasing the transfer revenue and areas of existing construction land and infrastructure construction investment. The study of the impact of China’s urbanization on land finance can serve as a reference for other developing countries’ urbanization, and can further provide practical guidance for the promotion of China’s new-type urbanization.

Date: 2023
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DOI: 10.1080/00036846.2022.2102133

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