Government Interference and the Efficiency of the Land Market in China

Municipal governments in China established direct control of the supply of urban land in August 2004. This paper examines whether this government action mitigates the efficiency of the residential land market. Using a unique data set of detailed land and residential community transactions with manua...

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Bibliographic Details
Published in:The journal of real estate finance and economics 2012-11, Vol.45 (4), p.919-938
Main Authors: Peng, Liang, Thibodeau, Thomas G.
Format: Article
Language:English
Subjects:
Auctions
Cities
Community
Economics
Economics and Finance
Efficiency
Efficient markets
Financial Services
Government
Hypotheses
Land
Land market
Land use
Leases
Leasing
Market efficiency
Municipal government
Prices
Pricing
Property rights
Regional/Spatial Science
Studies
Urban areas
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Summary:Municipal governments in China established direct control of the supply of urban land in August 2004. This paper examines whether this government action mitigates the efficiency of the residential land market. Using a unique data set of detailed land and residential community transactions with manually collected location information for residential land lots in seven Chinese cities, this paper analyzes the relationship between the land lease prices and residential property prices from the first quarter of 2001 to the fourth quarter of 2007. Results indicate that property prices determined land prices both before and after 2004:3, but the effect was significantly weaker after 2004:3. This is consistent with the hypothesis that the market for residential land became less efficient after municipal governments gained direct control of the land supply.
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-011-9300-9