Research On Institutional Constraints And City Size In China

In the process of Chinese fast urbanization, the coexistent phenomenon of large-scale land development and rigorous household registration system is obvious. Local governments, the dominant promoter for city development, show preference for the expansion of urban land area but not increase urban household population size. The mismatch of urban land size and population growth may incur serious economic and social problems for economy development and welfare improvement, such as waste of land resources, shortage of food supply, conflict-ridden of demolition, urban people division, etc. So we must pay attention to these features about city size and give determinant mechanism of city size and reasons of urban land area fast expansion from theoretical analysis, and also offer policy recommendations for city development.Generally speaking, institutional constraints have not been included in western urban economics, so there are no answers for China’s abnormal characteristics of urban size. For demostic research in this field, the emphasis is not on the relationship between institution and city development, or the analysis methods should be further standardized. After sorting out the relationship between central and local government, we can find that the local government implement funtions under given institutional constraints, such as decentralization, competition and household registration system, all these link with urban land size and population closely. Therefore, this study selects institutional constraints as analysis perspective, trying to analyze the motives of local governments on preference for land development and negligence for reducing household registration threshold, and gives new explantions for urban size characteristics.The study focuses on the following aspects. First, under the framework of new economic geography without institutional constraints, this study analyze the general characteristics of city size, it’s not only an improvement for new economic geography model, but also offering a comparable benchmark for the results from institutional constraints analysis. Second, based on the multi-task principal-agent theory, this study constructs a central-local decentralization model and analyzes the role of decentralization on urban land size and population, the results can be used to explain the reasons of local government’s preference on land development. Third, after collecting panel data of 184 cities above prefectural level, this study analyzes the impact of fiscal decentralization and local government competition for the growth of urban construction land area per capita.Fourth, after modeling the key features of household registration system, this study explains the economic incentives on controlling urban household population size, and compares the effects of increase total urban pupolation size and household population and urban land scale on economic growth rate under different cost of obtaining urban household registration.The above theoretical and empirical analysis has concluded rich conclusions, which closely related with urban land size and population are summarized as follows, on city development. First, after considering the external economies of scale and congestion effects, urban land price will show a higher increase than the growth rate of urban population size, which should increase earlier than urban land expansion, otherwise, the land expansion without population growth will bring waste of resources and efficiency losses. Second, the analysis of multi-task principal-agent theory shows, because of arduous duties on economic growth and livelihood improvement, if central government didn’t increase tax income share and transfer payments subsidies for local governments, the behaviour that prone to expand urban land area will not be hold back. Third, the results of panel data analysis show that fiscal decentralization and local government competition are the main reasons for fast expansion of urban land size, the intensification of urban land use will increase with economic development, but the addition in tangible public goods also makes the rapid expansion of urban use land. Fourth, the household registration system is the main reason for slow growth of urban household population size. For the promotion of economic growth, government will limit the number of urban household registration, but the problem that whether the threshold of urban household registration reduced significantly shoud be considered in accordance with different cost of obtaining urban household registration, otherwise the economic growth rate will be reduced.This study attempts to do some new works in the following aspects. First, in new economic geography, increasing return of scale is modeled as firm’s internal scale economy, but the externality problem, which is emphasized by urban economics, is ignored regretfully. Under the framework of new economic geography, this study discusses the role of externalities in decisive mechanism of city size. It’s a preliminary try for the application and development of new economic geography model. Second, the description for the relationship between decentralization and city size should be improved, and the relevant empirical analysis also focused on national and provincial level. This study reshapes the central-local relationship under dual-task principal-agent model, and also using city panel data to analyze the impact of decentralization and competition on urban construction land area per capita. Third, the phenomenons, such as person household separation and the unrealistic urban population statistics, which is caused by household registration system, are not been normalized in existing research. Under the optimal growth framework, this study discusses the effects, which are caused by the increase in urban household population size, urban population size and urban use land size, on economic growth. This analysis not only conforms with the realistic household registration system, but also in line with China’s current land policy, and offers more consultation on reform of household registration system and land development policy for economic circumstance with different cost of obtaining urban household registration.During the process of studying the mechanism of key institutional constraints, which include decentralizationon. local government competition and household registration system, on urban land size and population size, this study also points out the role of land, administration and other institutional constraints. The study also has some shortcomings, these can be used as a continuation of this topic and explore in future studies.