A New Era pp 155-173 | Cite as

How Does Land Finance Affect Economic Growth in China?

Mathematical Model Analysis and Empirical Analysis on Provincial Panel Data
  • Shumin Yue
  • Yi Lu


Land finance, as the local governments’ policy to collect revenue in China, is considered to be related with the economic growth. In recent years, whether land finance is contributing to economic growth and how land finance affects economic growth have been attracting more and more attention of the researchers. In this chapter, the economy is divided into two sectors—traditional Malthus section and modern Solow sector under the framework of the New-Classical Theory of Economic Growth. The effect of land finance on economic growth in China is derived via mathematical method based on economic growth model. The result shows that land finance will transfer the labor from the Malthus sector to the Solow sector, which will induce the economic growth. This chapter uses the panel data analysis of 30 provinces during 2004–2013 to test the above result. It finds that reducing the rural land and raising the land lease price have promoted the economic growth. The labor transfer from the Malthus sector to the Solow sector caused by land finance do more contribution to economic growth than reducing the rural land and raising the land lease price.


Land finance Economic growth Malthus sector Solow sector 


  1. Cobb, C., & Douglas, P. (1928). A theory of production. The American Economic Review, 18 (1), 139–165.Google Scholar
  2. Deng, X., Huang, J., Rozelle, S., & Uchida, E. (2010). Economic growth and the expansion of urban land in China. Urban Studies, 47 (4), 813–843.Google Scholar
  3. Ding, C., & Lichtenberg, E. (2011). Land and urban economic growth in China. Journal of Regional Science, 51 (2), 299–317.Google Scholar
  4. Du, X. J., Huang, Z. H., & Wu, C. F (2009). Land finance and economic growth in China—Analysis based on provincial panel data. Finance & Trade Economies (Caimao Jingji), 1, 60–64.Google Scholar
  5. Feng, L., Wei, L., & Jiang, Y. (2008). Study on the contribution of land element to economic growth in China. China Land Science (Zhongguo Tudi Kexue), 22 (12), 4–10.Google Scholar
  6. Gong, R. K. (2012). Tax-share reform, fiscal decentralization and housing price. Economic Theory and Business Management (Jingji Lilun Yu Jingji Guanli), 4, 45–56.Google Scholar
  7. Harvey, J., & Jowsey, E. (2004). Urban land economics (6th edition), Palgrave Macmillan.Google Scholar
  8. Homburg, S. (1991). Interest and growth in an economy with Land. The Canadian Journal of Economics, 24 (2), 450–459.Google Scholar
  9. Jiang, X. S., Liu, S. Y., & Li, Q. (2007). The land reform and economic growth. Management World (Guanli Shijie), 9, 1–9.Google Scholar
  10. Jiang, Z. (2014). Industrialization, local government efforts and land finance: A perspective of land finance in China. China Industrial Economics (Zhongguo Gongye Jingji), 319 (10), 33–45.Google Scholar
  11. Li, H., Yin, F., & Li, J. (2008). China’s construction land expansion and economic growth: A capital-output ratio based analysis. China & World Economy, 16 (6), 1–17.Google Scholar
  12. Lichtenberg, E., & Ding, C. (2009). Land officials as land developers: Urban spatial expansion in China. Journal of Urban Economics, 66, 57–64.Google Scholar
  13. Liu, J., Wu, J. N., & Ma, L. (2012). Local officials’ promotion and land finance in China: An empirical analysis of panel data from municipal-level cities. Journal of Public Management (Gonggong Guanli Xuebao), 9 (2), 11–23.Google Scholar
  14. Liu, X. G., Zhang, X., & Fang, W. Q. (2015). The income allocation of infrastructure between rural area and urban area: A perspective from labor transfer. The Journal of World Economy (Shijie Jingji), 3, 145–170.Google Scholar
  15. Loupias, C., & Wigniolle, B. (2013). Population, land and growth. Economic Modeling, 31, 223–237.Google Scholar
  16. McCain, R. (1970). Land in Fellner’s model of economic growth: Comment. The American Economic Review, 60 (3), 495–499.Google Scholar
  17. Metzemakers, P., & Louw, E. (2005). Land as a production factor. Chapter to be presented on 45th Congress of the European Regional Science Association in Amsterdam, 23–27.Google Scholar
  18. Ngai, R. (2004). Barriers and the transition to modern growth. Journal of Monetary Economics, 51 (7), 1353–1383.Google Scholar
  19. Nichols, D. (1970). Land and economic growth. The American Economic Review, 60 (3), 332–340.Google Scholar
  20. Research Group on China’s Economic Growth (CASS). (2011). Urbanization, fiscal expansion and economic growth, Economic Research Journal (Jingji Yanjiu), 46 (11), 4–20.Google Scholar
  21. Rhee, C. (1991). Dynamic inefficiency in an economy with land. Review of Economic Studies, 58 (4), 791–797.Google Scholar
  22. Solow, R. (1974). Intergenerational equity and exhaustible resources. The Review of Economic Studies, 41, 29–45.Google Scholar
  23. Sun, X. L., & Zhou, F. Z. (2013). Land finance and the tax-sharing system: An empirical explanation. Social Sciences in China (Zhongguo Shehui Kexue), 4, 40–59.Google Scholar
  24. Wu, Y., Zhang, X., Skitmore, M., Song, Y., & Hui, E. (2014). Industrial land price and its impact on urban growth: A Chinese case study. Land Use Policy, 36, 199–209.Google Scholar
  25. Xue, B., & Chi, X. (2010). Land finance, rent-seeking and economic growth. Public Finance Research (Caizheng Yanjiu), 2, 27–30.Google Scholar
  26. Ye, J. P., Ma, C. F., & Zhang, Q. H. (2011). The analysis on the contribution of land to economic growth in China: Based on spatial panel data. Finance & Trade Economies (Caimao Jingji), 4, 15–23.Google Scholar
  27. Yu, J. W., Xiao, J., & Gong, L. T. (2015). Political cycle and land leasing: Evidence from Chinese cities. Economic Research Journal (Jingji Yanjiu), 50 (2), 88–102.Google Scholar
  28. Zou, W., & Liu, H. Y. (2015). Land finance in China: an empirical analysis of spatial panel data from municipal-level cities. Economist (Jingji Xuejia), 9, 21–32.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Shumin Yue
    • 1
  • Yi Lu
    • 1
  1. 1.School of FinanceRenmin University of ChinaBeijingChina

Personalised recommendations