Research On The Interaction Of Chinese Local Governments’ Land Leasing Behaviors

Central government combines the development of official’s career with localeconomic development closely in Chinese particular land leasing and electoral system,which is the result of the evaluation for local achievements based on urban GDP growthlargely. It brings the extraordinary economic growth in China by inspiring localgovernments’ competition for economic progress, while it has created some problemscausing the concern of the society and academics. The purpose of this paper is to figureout how yardstick competition influences local governments’ land leasing behaviorspatially in Chinese particular land supply system. Suggestion for central and localgoverments will be provided according to theoretical analysis and empirical studies.In theoretical part, the manifestation and source of local governments’ interactionbehavior on land leasing is illuminated at the first place. Relative criteria for officialpromotion brings out the yardstick competition from ‘top’, while mobile productivefactors are the cause of the yardstick competition from ‘bottom’. And how local ratiosof different kind of land to total land supply are affected by other governments’decisions due to yardstick competition from ‘top’ and ‘bottom’ is interpted. Then anevidence of convergence in local land supply is provided by using177prefecture-levelcities from2009to2013. Next, the derivation of three-sector general equilibrium modelshow that the structure of land leasing is determined by the preference for fiscal incometo economic output, and the preference is effected by the proportion of official’spromotion without local governments’ competition. As a results of adding yardstickcompetition, other governments’ decisions will influence the local proportion ofindustrial land supplied.In empirical part, three hypotheses are verified by using panel data model andspatial economictric model. The result shows that:1) The structure of land supply isdirectly influenced by local government’s relative preference for fiscal income andeconomic output, indirect effected by its official’s chance of promotion through theinfluence of relative preference in the face of the immobile production factors.2) Thespatial autocorrelation do exist between local government and their competitors whoserank near them in the ratio of industrial and residential to total land supply because of yardstick competition from the ‘top’; when it comes to the yardstick competition fromthe ‘bottom’, both estimated parameters of industrial and residential uncover positivespatial autocorrelation in local land leasing behavior of jurisdictions where the ability ofattracting labor or capital are close.Finally, based on the research results, it suggests that the central governmentwould better complete the reform of taxation system and promotion system as soon aspossible, and local government should take the initiative to strengthen communicationbetween governments and increase the transparency of administrative affairs, which willcontributes to mitigate the detrimental impact on the behavior of local government landleasing.