Greater centralization,increased marketization? Evidence from China’s primary urban land market

Abstract

Exploring the market-oriented allocation of resources is a significant topic in both academic research and government reform. In China, local governments have a monopoly over the supply of primary urban land, leading to an underdeveloped land market. This study examined the supply of primary urban land in China to assess whether enhancing the centralization of land supply by local governments improves the efficiency and equity of market-oriented resource allocation. Using a comprehensive dataset that includes parcel-level data (1,070,823 observations) and city-level data (251 cities) from 2007 to 2021, this study constructs an econometric model. The estimation results indicate that a greater degree of centralization in the primary urban land market improves market-based resource allocation and enhances market performance. The market-oriented transaction prices, which are more in line with the Law of One Price, reduced development time and increased plot ratios. Furthermore, from a macroeconomic perspective, heightened land supply frequency may lead to an increase in housing prices, potentially impeding industrial development. Centralizing land supply is not a complex reform; rather, it has discernible effects. The findings and recommendations are relevant not only for China but also for other developing and transitional countries.