Land Conversion Across Cities in China

Shihe Fu, Xiaocong Xu, Junfu Zhang

Regional Science and Urban Economics 2021, in press

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The Chinese government has been using annual quotas to control the amount of farmland that can be converted for urban uses. Using an analysis sample of more than 1.5 million land-lease transactions during 2007-2016, we document facts on land conversion for urban development in China. We present evidence that land conversion quotas have been increasingly misallocated across cities in that a growing share of land conversion is occurring in less productive cities. A city-level production function is estimated for counterfactual analysis. Based on estimated parameters, we assess the economic losses from misallocation of land conversion quotas across cities in China and calculate the potential gains from reallocating land quotas to cities where urban land is more productive.

JEL-Codes: R12, R13, R14, R52, R58.

Keywords: Land conversion, land quota, misallocation, urbanization,