Land Finance and Urbanization in China
Student Researcher: Wei You
Location: China
This project examined the role of “land finance” in urbanization in China since 1994. Under this system, Chinese local governments requisition farmland from farmers' collectives at low prices, and then lease the land long term to investors who want to develop it for residential, industrial, or commercial uses. Local governments make revenues from the land prices gap and invest most of them in local infrastructure, which further pushes land prices up, causing a cycle.
This project makes use of the 2008 farmland “redline” policy shock to identify the importance of this system. By this policy the counties with more fertile farmland surrounding urban areas were subject to bigger shocks than other counties after 2008. The aim is to show to what degree land finance accelerates the urbanization process in China as opposed to a scenario where land finance were not used.