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FISCAL EXPENDITURE AND INDUSTRIAL LAND PRICE IN CHINA: THEORY AND EVIDENCE
Author(s) -
Tsai PiHan,
Huang ChienYu,
Chiang TsunFeng
Publication year - 2020
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12493
Subject(s) - economics , stylized fact , bivariate analysis , incentive , externality , public expenditure , china , price level , macroeconomics , monetary economics , public finance , microeconomics , statistics , mathematics , political science , law
This paper aims to discover the mechanism behind the positive correlation between local fiscal expenditure and industrial land price in China, a stylized fact discovered by bivariate and regression analyses. The model shows that if the positive externality of government expenditure on growth is sufficiently high, the local government has an incentive to increase public spending in exchange for the reduced demand for industrial land by charging a higher markup and driving up the industrial land price. Therefore, we observe a positive correlation between the local fiscal expenditure and industrial land price. ( JEL D42, H72, R51)