ABSTRACT China’s administrative system practices a unique phenomenon of setting fiscal revenue targets that are often regarded as political tasks by local government officials. As land is the core resource of local government, land finance becomes the best strategy for local governments facing high fiscal revenue targets. With rising land value, house prices will continue to rise. Thus, the fiscal revenue target is an important political factor affecting house price growth, but the existing literature does not attend to this point. This article uses panel data on 35 large and medium-sized cities in China from 2011 to 2016 to study the influence of local fiscal revenue targets on house prices and its underlying mechanism. The results show that these targets are an important political factor in driving up house prices, and the intervening mechanism is local land finance. As gross domestic product per capita increases, the influence of fiscal revenue targets on house prices declines. Conversely, in areas where housing purchases are restricted and house prices are controlled, the influence of fiscal revenue targets on the fiscal burden for the public increases.
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