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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. 


The researcher wrote a Python program to use Baidu API to batch geocode firm addresses from the Chinese Industrial Enterprises Database, so that firm-level information could be merged with other data.This data set will be used to look at how the number of new industrial enterprises and productivity of incumbent enterprises changed in the counties subject to larger policy shocks. China seems to have over-converted land for urban use because of over-incentives for local officials to develop land.