Governing Land Use Decisions In Urban Renewal:Transaction Cost Perspective

Faced with the unsustainability of agricultural land conversion and the inefficiency of built-up areas,urban renewal has become an inevitable choice for future development in China.However,aside from the demolition and construction costs,costs in the process can't be ignored to complete an urban renewal project.As an important part of process costs,land use decision costs can result in project delay,suspension or even termination if they are unduly high,which means obvious incremental value can't be achieved and every stakeholder loses the opportunity to be better off.As a big city of serious land resource shortage,Shenzhen has explored to shift from the traditional land use decision mode dominated by the municipal government(Governance Structure ?)to several alternative participatory modes.Stakeholder involvement planning mode(Governance Structure ?)from Hong Kong and flexible planning mode from Singapore(Governance Structure ?)were introduced but halted,and the unit cooperative planning mode(Governance Structure ?)first tried out in 2010,then popularized afterwards.Apparently,the application of different modes has impacts on land use decision costs and process efficiency in urban renewal.It is quite curious that how different the process costs are when four modes are adopted respectively and the reason behind their diverse performances.To explore the answers to the questions above,the paper introduces transaction cost theory and describes the relations among exogenous variables,process and outcome of land use decision as a transaction with the combination of IAD and four-level frameworks.The research framework to analyze the impact mechanism of land use decision governance structure on transaction cost is established and two unverified influence paths are raised.Then social network analysis method is employed to present four land use decision governance structures in graphs and analyze their mathematical and functional characteristics respectively.Next,the paper reveals the phenomenon of diverse effects of different governance structures on transaction costs,and explores the reason behind by verifying two influence paths respectively.Based on the research content and design,the main conclusions are as followed:(1)The mathematical characteristics including density,variation coefficient of relative nodal out-degree,variation coefficient of relative nodal degree and standard deviation of relative authoritative position are calculated for four land use decision governance structures in Shenzhen as the basis to judge their functions.In Governance Structure ?,the function of promoting information flow is weak while the function of controlling information flow is strong,and the function of accumulating social capital is weak.The promotion and accumulation functions are weak while the control function is strong in Governance Structure ?,and the promotion function is strong while control and accumulation functions are weak in Governance Structure ?.In Governance Structure ?,both the promotion and control functions are medium-to-strong,and accumulation function is strong.(2)For revealing the phenomenon of diverse effects of different governance structures on transaction costs,four urban renewal projects in Shenzhen are chosen as study cases in which four governance structures are applied respectively,and they are quite similar in transaction exogenous variables and human factors.Data are collected to calculate the time for completing land use decision process(T)and specific human capital inputs(C)as the representative indexes of transaction costs.The results show Governance Structure ? and Governance Structure ? don't prevail over Governance Structure ? in saving transaction costs,and in the former ex-ante costs for drafting planning documents are too high while in the latter ex-post costs for implementing planning documents are too high.But the values of representative indexes are much lower in Governance Structure ?,the ex-post costs decrease significantly at the price of a slight increase in ex-ante costs,so the total costs are saved.(3)The impact mechanism ? of governance structure on transaction costs is verified,which indicates that the match degree between promotion/control functions and uncertainty decides the level of costs.The uncertainty of land use decision in urban renewal can be categorized into objective uncertainty(U1),uncertainty of subjective cognition(U2),uncertainty of subjective differences(U3),uncertainty of subjective opportunism(U4),and they are influenced by transaction exogenous variables.The results show Ui,U3 and U4 are high while U2 is relatively low in recent Shenzhen practices,which means only when Governance Structure IV with medium-to-strong level in both promotion and control functions is applied can the transaction costs be saved.When Governance Structure ?,? and ? are applied in similar projects,the costs are much higher due to the partial mismatch between promotion/control function and uncertainty.(4)The impact mechanism ? of governance structure on transaction costs is verified,which indicates that the accumulation function influences the level of uncertainty,then decides the level of transaction costs.Questionnaire survey is conducted in the four projects from the individual property owner perspective.The descriptive statistics results show that six indexes representing social capital in decision groups are much higher in project in which Governance Structure ? is applied,which means this structure helps to accumulate social capital.The structural equation model results show that all the standardized path weights from variables representing social capital to variables representing transaction costs are positive,indicating the higher social capital helps to save transaction costs in land use decision.Based on the conclusions above,several suggestions are proposed to optimize the governance on land use decisions in urban renewal from economizing transaction costs perspective.(1)The general principles to optimize governance structures are matching the uncertainty on one hand and accumulating social capital on the other hand.For other cities in China,a simple duplication of Shenzhen mode is infeasible and two possible paths to optimize the traditional mode are adequate government decentralization and developer or local government involvement as information intermediary.(2)The general principle to optimize institutional environment is to decrease its negative impacts on transaction costs,and the possible directions for Shenzhen's improvement are the institutionalization of compensation and the fair running of compulsory public power.