How did development zones affect China’s land transfers? The scale, marketization, and resource allocation effect

Abstract

The land transfer is an important policy tool for development zones (DZs) to guide the allocation of industrial resources. The immovability of land and its high reallocation cost make the efficiency loss caused by any land resource mismatch more challenging to remedy. Therefore, exploring the effects of the establishment of DZs on the land transfer policies of local governments and subsequent resource allocation can contribute to the rational control of land transfer policies. Accordingly, this study used propensity score matching, difference-in-differences estimation, and the instrumental variable method to quantify the associations among the establishment of DZs, land transfer, and resource allocation efficiency in China. The results show that the establishment of DZs promotes local governments to expand the area of transferred industrial land and increases the ratio of listing transfers, which reduces the marketization degree of land transfers. Furthermore, the establishment of DZs weakens the selection effect of land transfers, which distorts resource allocation and hinders the resource allocation efficiency of the manufacturing industry. The results suggest that it is necessary to switch from the traditional “extensive” land development strategy to the economical and intensive use of DZ land. The marketization of land transfer in the DZs should be increased and land should be allocated to firms with higher marginal output.