Government-enterprise collusion and land supply structure in Chinese cities

Abstract

Using micro land leasing data and detailed individual information of mayors in 285 Chinese prefecture-level cities, we investigate the impacts of collusion between local government officials and enterprises on local land supply structure. The findings suggest that, after controlling for mayors' and cities' characteristics, mayors with local working experience prefer to lease more industrial land than foreign mayors. Meanwhile, there is significant heterogeneity among different cities: in cities where the price of commercial & residential land is much higher than industrial land, local mayors prefer to lease commercial & residential land for higher fiscal revenue. On the contrary, local mayors pursue to the long-term sustainable tax revenue by colluding with industrial firms in less developed cities. Besides, we find that the older and fast-retired local mayors, who ever had worked as deputy mayors for a long time, would eagerly collude with real estate enterprises to lease commercial & residential land for short-term return. The findings of this paper are of great policy significance for the current land leasing of local government in countries like China.