| Abstract: | We document that local governments in China segment land markets by specifying land use, resulting in significant manufacturing land discounts relative to services and housing, especially in provinces with lower relative productivity in manufacturing. To analyze these policies, we develop a multi-sector quantitative spatial equilibrium model with free entry of firms, where local governments non-cooperatively specify land use to maximize local objectives. We find that maximizing local manufacturing output best replicates observed land pricing, particularly the negative relationship between relative land prices and relative manufacturing productivity across regions. In contrast, local-welfare-maximizing policies yield a positive relationship but still favor manufacturing, albeit less so, due to manufacturing's stronger amplification effect through input-output linkages, with comparative advantage and trade costs influencing policy outcomes. We find that current land policies reduce national welfare by 2.2% compared to a scenario of equal land prices across uses, while local-welfare-maximizing policies yield gains close to the cooperative equilibrium of 3.7%. |
| Biography: | Xican (Sean) Xi is an associate professor at the School of Economics at Fudan University. His research expertise encompasses macroeconomics, development economics, and environmental economics, with a focus on structural transformation and resource allocation efficiency in China. His work has been published in journals such as PNAS, American Economic Journal: Macroeconomics, Journal of Economic Dynamics and Control, and Canadian Journal of Economics. |
