Date of Award
Master of Philosophy (MPHIL)
Prof. WEI Xiangdong
Prof. FAN Cheng Ze Simon
Using an exhaustive monthly panel data set of 331 cities between 2004 and 2015, we empirically study the political cycle in primary land markets in Chinese cities, where the local government is the sole supplier and seller of the land and holds stress-free elections. We find that the land supply pattern is far from smooth: A city party secretary who is the leading official figure in that city would supply less land during the latter period of his/her office, especially after the first five-year term. Land supply, measured by the number of plots, land area and land revenue, refers to all land transacted by local government during a certain period, mainly through allocation or granting. The main finding is robust to a wide battery of robustness checks. After considering several potential mechanisms driving this political cycle, we conclude that it can be explained by lower incentives for city party secretaries to supply. In particular, this decreasing supply pattern cannot be explained by the tighter constraint on land supply or the decrease from demand side given higher political uncertainty. Moreover, the evidence has been strongly supportive of this view: The lower incentives in the latter years might be caused by the pressure and need for city party secretaries who were promoted from that city to channel some favors back to local interest groups after they come to power, which challenges the stereotype that an official only needs to please superiors in the absence of competitive elections. We further find that there exists a cost for city party secretaries to supply land. For land that can be supplied with low cost, city party secretaries will not decrease the supply owing to positive net benefit. Using proof by contradiction, we assess the efficiency and reject the information channel through which the favoritism in land supply will increase social welfare, because city party secretaries possess better information. Surprisingly, our data shows that mayors do not play a significant role in land supply decisions, which is opposite to the conventional wisdom given their administrative roles.
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Li, X. (2018). The political cycle in China's primary land market (Master's thesis, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/otd/36/