AcademicsWorking Papers

Government Policy and Land Price Dynamics: A Quantitative Assessment of China's Factor Market
Vipul Bhatt, Mouhua Liao, Min Qiang Zhao
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This paper examines the role played by government policy regarding factors of pro- duction in shaping the dynamics of a growing economy. Using land as an example of an important productive factor, we develop a quantitative model with endogenous land price policy regimes to rationalize the following three economic reforms in China: introduction of non-SOEs (state-owned enterprises); reform of SOEs characterized by their retreat from the competitive manufacturing sector and the establishment of state monopolies in factor markets around 2000; and a regime switch from dual-track land pricing to land price discrimination by use. We calibrate our model to key economic indicators for China and quantify the e ects of these reforms. Our calibrated mo- del can match several stylized facts for China after 2000 such as widening disparity in land prices by use, rapid growth in housing price, land revenue, and government expenditures on public goods, and the steep decline in labor share for income.
JEL-Codes: Q15, R38, H71, E25, O18.
Keywords: Dual-track Pricing, Land Price Discrimination, State Monopoly, Land Market Reforms.

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