Career incentives of city leaders and urban spatial expansion in China

Abstract

This paper develops a theoretical framework to study the critical role that politics play in shaping the spatial dimension of China’s urbanization and the related welfare implications. Utilizing a large data set of residential land transactions matched with city leaders in 200 Chinese cities from 2000 through 2011, the empirical analysis finds that a 1 standard deviation increase in the career-incentive measure leads to 9 additional kilo-meters of outward expansion, a 23% increase relative to the sample average. It also finds some suggestive evidence pointing to the distortionary impacts of overly strong incentives of city leaders on spatial expansion, consistent with the theory.