Abstract
This paper studies how political cycles change the mix of industrial and residential land in urban land leasing. The mixture of different types of land leasing in cities affects urban landscape, resident welfare, and economic sustainability. Using prefecture-level panel data from China and statistical regressions, this paper finds that cities lease out 3% more industrial land, as a percentage of total annual urban land leasing, when their party committee secretaries have been in office for no more than two years. In the same period, they lease out 2% less residential land. This is explained by the strategic behaviors of party committee secretaries to increase their chances of political promotion. Urban land leasing fuels local economic performance and increases the chance of city leaders’ promotion. While the economic benefits of residential land are immediate, those of industrial land cannot be reaped until two years later. This divided timeline results in more aggressive leasing of industrial land early on in party committee secretaries’ service terms, and that of residential land later on. Mayors’ service terms do not have the same effect. This political cycle distorts the temporal and spatial distributions of industrial and residential land in cities, and results in inefficient land use and unstable real estate markets.
Highlights
Urban land use is closely related to economic development [1], environmental sustainability [2,3], public health [4,5] and housing affordability [6]
This paper asks the following questions: Do political cycles prevail in the mix of industrial and residential land leasing in China? And if yes, how large is the effect and what incentivizes local politicians to do so? This paper is the first to ask these questions, and it provides another case of how the political cycle is factored into urban land use patterns in the setting of a developing and authoritarian country—China
Circle back to the questions we raise in the introduction: do political cycles prevail in the mix of industrial and residential land leasing in China? If yes, what are the magnitudes and what incentivizes local politicians to do so? A brief answer would be yes, there are political cycles, but the magnitudes are modest, and they prevail because of local politicians’ pursuit of political promotion
Summary
Urban land use is closely related to economic development [1], environmental sustainability [2,3], public health [4,5] and housing affordability [6]. Local leaders tend to deliver right before the end of their service terms to win the hearts of voters for the election; this causes political business and fiscal cycles [19,20]. They court voters with favorable zoning ordinances and popular land use plans. China’s urban land is not fully competitive, but monopolized by local governments on the supply side This offers city politicians some degree of autonomy to steer the market power, which may strengthen the relationship between politics and urban land use.
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