The competition for industrial investment among local governments has distorted the allocation of construction land and brought the rising pressure on residential land prices and housing prices. The existing literature ignores the transmission mechanism between the competition of attracting investment and residential land prices as well as housing prices. Based on the panel data of 104 Chinese major cities from 2009 to 2015, and applying the mediation effect method, this paper investigates the mechanism of attracting investment competition affecting residential land prices and housing prices. The study demonstrates that the competition of attracting investment has significantly increased residential land prices and housing prices. Specifically, the competition of attracting investment mainly raises residential land prices by reducing the supply elasticity of residential land, decreasing the per capita living land area and strengthening the rigidity of housing demand. And the competition promotes housing prices through the paths of increasing government intervention, reducing the supply elasticity of residential land and improving the level of industrial agglomeration. Compared with the housing price, the price of residential land is not sensitive to demand shock because of the influence of the government’s administrative intervention. Furthermore, the competition of attracting investment in the eastern region has remarkably increased residential land prices and housing prices, while the competition in the central and western regions has a significant negative impact on residential land prices and the impact on housing prices is insignificant. And the effect of attracting investment competition in provincial capitals on promoting residential land prices and housing prices is significantly higher than that in general prefecture-level cities. The conclusion of the paper reveals the inefficiency problem under the intervention of local governments. The key to realize the healthy and coordinated development of the real estate industry and the regional balanced development is to reconstruct the incentive mechanism of local governments, improve the market-based allocation of construction land, and optimize the allocation of industrial resources. Compared with the existing literature, the main contributions of this paper lie in three aspects: Firstly, this paper explains the mechanism of attracting investment competition affecting residential land prices and housing prices, deepening the understanding of the political and economic logic behind the Chinese real estate market. Secondly, this paper explores the channels through which the competition of attracting investment affects residential land prices and housing prices. Thirdly, breaking the single research perspective, this paper examines the heterogeneous impact of attracting investment competition on residential land prices and housing prices in cities with different geographical locations and cities at different administrative levels, providing economic logic inspiration for differentiated housing prices in China.
Competition of Attracting Investment，Residential Land Prices and Housing Prices
Journal of Finance and Economics Vol. 45, Issue 07, pp. 140 - 152,封三 (2019) DOI:10.16538/j.cnki.jfe.2019.07.011
 Cai H Y, Xu Y Z. Does trade openness affect the upgrading of China’s industrial structure?[J]. The Journal of Quantitative & Technical Economics, 2017, (10): 3-22. (In Chinese)
 Cao Q F, Wang J T. Reasonable ratio between China’s industrial land and residential land: Empirical study of 35 large and medium-sized cities[J]. Finance & Economics, 2014, (9): 88-98. (In Chinese)
 Fan X M, Xu Y Z. Fiscal pressure, land selling method and spatial competition[J]. Journal of Shanxi University of Finance and Economics, 2018, (11): 13-26. (In Chinese)
 Liu S Y. Land issue in the transitional China[M]. Beijing: China Development Press, 2014. (In Chinese)
 Lu M, Zhang H, Liang W Q. How the bias toward central/western land supplies boosts wages in the East[J]. Social Sciences in China, 2015, (5): 59-83. (In Chinese)
 Sun X L, Zhou F Z. Land finance and the tax-sharing system: An empirical interpretation[J]. Social Sciences in China, 2013, (4): 40-59. (In Chinese)
 Tao R, Lu X, Su F B, et al. China’s transition and development model under evolving regional competition patterns[J]. Economic Research Journal, 2009, (7): 21-33. (In Chinese)
 Tao R, Yuan F, Cao G Z. Regional competition, land transfer and local fiscal effects: An analysis based on the panel data of China’s prefecture level cities in 1999 to 2003[J]. The Journal of World Economy, 2007, (10): 15-27. (In Chinese)
 Wang H J, Zong Q Q, Tao J. Race to the bottom: The manufacturing land leasing strategy of municipal governments in China[J]. South China Journal of Economics, 2013, (9): 37-51. (In Chinese)
 Wang J T, Cao Q F, Tian S Y. Industrial agglomeration, government intervention and industrial land prices: An empirical study on 35 cities in China[J]. China Land Sciences, 2012, (9): 12-20. (In Chinese)
 Wang Y L, Zou X Q. Land transfer in China: To obtain land revenue or attract business and investment?[J]. Economic Review, 2016, (5): 68-82. (In Chinese)
 Wang Y, Yang G L. Intervention for economic growth: Analysis of land transfer strategy of local government[J]. Management World, 2016, (5): 18-31. (In Chinese)
 Wu Q, Li Y L. Fiscal decentralization, local governments competition and land fiscal revenue[J]. Finance & Trade Economics, 2010, (7):51-59. (In Chinese)
 Yang Q J, Peng Y Q. Promotion competition and industrial land conveyance: An empirical study based on the city level panel data[J]. Economic Theory and Business Management, 2015, (9): 5-17. (In Chinese)
 Yang Q J, Zhuo P, Yang J D. Industrial land conveyance and the investment quality race in the bottom line: An empirical study based on the panel data of China during 2007-2011[J]. Management World, 2014, (11): 24-34. (In Chinese)
 Yuan Y J, Guo R. Producer services agglomeration, manufacturing industry agglomeration and technological innovation: An empirical study based on provincial panel data[J]. Economist, 2018, (5): 23-31. (In Chinese)
 Zhang J, Gao Y, Fu Y, et al. Why does China enjoy so much better physical infrastructure?[J]. Economic Research Journal, 2007, (3): 4-19. (In Chinese)
 Zhang L, Nian Y W, Pi J Y, et al. Land policy, land supply structure and housing prices[J]. China Journal of Economics, 2017, (1): 91-118. (In Chinese)
 Zhang L, Wand X B, Xu X X. Fiscal incentive, political incentive and local officials’ land supply[J]. China Industrial Economics, 2011, (4): 35-43. (In Chinese)
 Zhang T H, Dong Z Q, Xu H J. Is the big city’s enterprise resource allocation more efficient? An empirical study based on China’s manufacturing enterprises[J]. Industrial Economics Research, 2017, (4): 41-55. (In Chinese)
 Zhang X H, Zheng S Q. Local government motivation behind the shortage of housing land supply[J]. Exploration and Free Views, 2010, (11): 54-58. (In Chinese)
 Zhao W Z, Yang J D. The fiscal gap of local government and the way of land transfer: An explanation based on the mutually beneficial behavior of local government and state-owned enterprises[J]. Management World, 2015, (4): 11-24. (In Chinese)
 Zheng S Q, Shi Z. Land and housing market under land finance: An analysis of local government behavior[J]. Social Sciences in Guangdong, 2011, (2): 5-10. (In Chinese)
 Zhou F Z. Large-scale construction: Land finance and local government behavior[J]. Comparative Economic & Social Systems, 2010, (3): 77-89. (In Chinese)
 Audretsch D B，Feldman M P. R&D spillovers and the geography of innovation and production[J]. The American Economic Review, 1996, 86(3): 630-640.
 Li H，Kung J K S. Fiscal incentives and policy choices of local governments: Evidence from China[J]. Journal of Development Economics, 2015, 116: 89-104.
 Li H B，Zhou L A. Political turnover and economic performance: The incentive role of personnel control in China[J]. Journal of Public Economics, 2005, 89(9-10): 1743-1762.
 Xu C G. The fundamental institutions of China’s reforms and development[J]. Journal of Economic Literature, 2011, 49(4): 1076-1151.
 Zhang J. Zhu Rongji might be right: Understanding the mechanism of fast economic development in China[J]. The World Economy, 2012, 35(12): 1712-1732.
Cite this article
Fan Xiaomin, Xu Yingzhi. Competition of Attracting Investment，Residential Land Prices and Housing Prices[J]. Journal of Finance and Economics, 2019, 45(7): 140-152.
Previous: Family-Work Conflict and Employees’ Well-Bing：Strengthening and Supporting Informal Work Resources