Free land, heavy burden: Industrial land administrative allocation and local fiscal imbalance in China

Abstract

Using data from 285 Chinese cities for the years 2005–2018, this study analyzes the relationship between industrial land administrative allocation and local government fiscal imbalance in China. We find that the administrative allocation of industrial land significantly increases excessive fiscal expenditures and exacerbated fiscal imbalances. The increases in relevant government investment and transportation construction cost are the mechanisms by which industrial land administrative allocation aggravate government's financial imbalance. Further analysis indicates that land administrative allocation in medium cities, highly industrialized cities, and highly marketized cities have more significant impacts on local government' fiscal excess expenditures and deficits.