Fiscal decentralization, yardstick competition in determining Chinese local governments’ land conveyance behavior

Wenyin Yang; Yang Chen

doi:10.1007/978-981-13-0983-0_1

Fiscal decentralization, yardstick competition in determining Chinese local governments’ land conveyance behavior

Wenyin Yang, Yang Chen^*

^*Corresponding author for this work

Department of Economics

Xi'an Jiaotong-Liverpool University

Research output: Chapter in Book or Report/Conference proceeding › Chapter › peer-review

Abstract

This chapter investigates the institutional and political motivation behind Chinese local governments’ land conveyance behavior. The principal-agent model is adopted to illustrate the mechanisms of how yardstick competition and fiscal decentralization encourage land sale. We find that although yardstick competition promotes short-term economic growth, the presence of land finance impairs the “selection effect” of yardstick competition. Using a panel data of 31 Chinese provinces from 2003 to 2011 in a spatial autoregressive model, we show that yardstick competition exerts a large positive impact on the intensity of land sale and leasing, while the influence of fiscal decentralization has a moderate impact and the influence of foreign direct investment (FDI) appears to be insignificant.

Original language	English
Title of host publication	The State of China's State Capitalism
Subtitle of host publication	Evidence of Its Successes and Pitfalls
Publisher	Palgrave Macmillan
Pages	3-30
Number of pages	28
ISBN (Electronic)	9789811309830
ISBN (Print)	9789811309823
DOIs	https://doi.org/10.1007/978-981-13-0983-0_1
Publication status	Published - 1 Jan 2018

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abstract = "This chapter investigates the institutional and political motivation behind Chinese local governments{\textquoteright} land conveyance behavior. The principal-agent model is adopted to illustrate the mechanisms of how yardstick competition and fiscal decentralization encourage land sale. We find that although yardstick competition promotes short-term economic growth, the presence of land finance impairs the “selection effect” of yardstick competition. Using a panel data of 31 Chinese provinces from 2003 to 2011 in a spatial autoregressive model, we show that yardstick competition exerts a large positive impact on the intensity of land sale and leasing, while the influence of fiscal decentralization has a moderate impact and the influence of foreign direct investment (FDI) appears to be insignificant.",

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AB - This chapter investigates the institutional and political motivation behind Chinese local governments’ land conveyance behavior. The principal-agent model is adopted to illustrate the mechanisms of how yardstick competition and fiscal decentralization encourage land sale. We find that although yardstick competition promotes short-term economic growth, the presence of land finance impairs the “selection effect” of yardstick competition. Using a panel data of 31 Chinese provinces from 2003 to 2011 in a spatial autoregressive model, we show that yardstick competition exerts a large positive impact on the intensity of land sale and leasing, while the influence of fiscal decentralization has a moderate impact and the influence of foreign direct investment (FDI) appears to be insignificant.

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ER -

Fiscal decentralization, yardstick competition in determining Chinese local governments’ land conveyance behavior

Abstract

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