Government–Directed Urban Growth, Firm Entry, and Industrial Land Prices in Chinese Cities
Jan K. Brueckner, Wenhua Liu, Wei Xiao, Junfu Zhang
We examine the effect of a large-scale administrative reorganization in China, where counties are annexed into cities to accommodate urban growth. We present a simple model to illustrate how this annexation may affect firm entry decisions and in turn land market outcomes. Using nationwide data on land-lease transactions, we find that annexation raises industrial land prices in the annexed counties by 7 percent but does not reduce land prices in neighboring counties and central cities. We show that the annexed counties experienced increases in firm entry and investment, offering a plausible mechanism for the effect on industrial land prices.
Event: World Bank Land Conference 2024 - Washington
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