Local Government Competition And Land Transfer: Theory And Evidence

Since the reform and opening up more than 40 years ago,China’s economy has maintained a high-speed growth,creating a miracle of economic growth in China,in which the transfer of state-owned land use rights has made an inestimable contribution.In 1994,the tax sharing system began to be implemented,which standardized the operation of fiscal revenue within the budget,but also gave the local government more control.The local government is under a financial system with reduced financial power and increased administrative power,which leads to the mismatch of financial revenue and expenditure.The local government has a strong incentive to expand extra-budgetary revenue to develop the local economy.To this end,the local government through the high land transfer income to increase their own income to ease their own financial pressure.Since then,it has become an indisputable fact that local governments in our country compete with each other.At the same time,taking economic performance as a measure of promotion competition,the local government has enough power to attract more investment and attract more available resources for its own promotion.Therefore,under the close combination of China’s fiscal decentralization system and political centralization system,local governments are encouraged by the economy,which makes the competition among local governments form an internal motive force.In the process of competition,local governments at all levels,forced by the pressure to fill the financial gap and the desire to maximize their own interests,began to look for potential revenue in the land transfer.Admittedly,the huge land finance brought by the land resources and the local government’s competitive behaviors such as inviting foreign investment can greatly promote the regional economic development,but the absolute control of the local government over the land market has also led to the local government’s increasing dependence on the land finance,which has a series of adverse effects such as high degree of land price deviation,lower environmental standards,government intervention failure,etc.Only by studying the impact of local government competition on land transfer behavior can the problem be solved from the root.This is of great practical significance to ensure high-quality economic development and promote healthy and orderly competition.This thesis first defines the key concepts involved in the research,and then sorts out the relevant literature.It sorts out and summarizes the logic and results of the existing research from three aspects: local government competition,land transfer behavior and local government competition and land transfer behavior.Subsequently,theoretical analysis is carried out and hypotheses to be tested are put forward.The follow-up empirical analysis is based on the national 272 prefecture-level cities from 2007 to 2019 nearly 1.65 million pieces of land micro-data matching the macro-economic data at the city level to form the city panel data.The economic incentive indicators between local governments are used to measure the government competition,i.e.fiscal decentralization and investment competition indicators.The land transfer behavior is investigated from four aspects: land transfer scale,land transfer price,different transfer methods and land transfer industry.The impact effect of local government competition and local government behavior is comprehensively explored.Among them,the benchmark regression model uses double fixed effect regression model to carry out different regional regression analysis,endogenous problem treatment and a series of robustness tests on the scale of land transfer to ensure the reliability of the results.The empirical results of this thesis show that the economic incentives of local government competition have indeed significantly promoted the land transfer,which is manifested by the fiscal decentralization and competition for capital introduction both changing in the same direction as the scale of land transfer;Fiscal decentralization and the price difference between commercial and residential land and industrial land change in the same direction;Compared with the agreement transfer,the positive impact of these two factors is mainly reflected in the "bidding,auction and hanging" transfer;Competition for foreign investment and the land transfer industry changed in the opposite direction.Based on the above conclusions,this thesis puts forward specific suggestions in order to ease the local financial pressure,promote orderly local competition and promote the long-term development of the land transfer market and the real estate market,so as to promote high-quality economic development.