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Land investment regulation and allocative efficiency: evidence from the Chinese manufacturing sector

Author

Listed:
  • Aidong Zhao
  • Huub Ploegmakers
  • Jan Rouwendal
  • Xianlei Ma

Abstract

This article analyzes the role of production factor land in the production process. Using a novel dataset of 20,205 newly established firms in the Chinese manufacturing sector from 2007 to 2014, our production function estimates suggest the existence of a sizable gap (averaging 50 USD/m2) between the marginal productivity of land and its user cost. Basic economic theory suggests a possible relationship with China’s minimum investment intensity (MII) regulation. An analysis using changes in MII limits over time and the resulting discontinuities at county borders confirms that larger gaps are significantly associated with increases in MII limits. Thus, the results of this study suggest that MII regulation leads to allocative inefficiency of land.

Suggested Citation

  • Aidong Zhao & Huub Ploegmakers & Jan Rouwendal & Xianlei Ma, 2025. "Land investment regulation and allocative efficiency: evidence from the Chinese manufacturing sector," Journal of Economic Geography, Oxford University Press, vol. 25(2), pages 151-174.
    • Handle: RePEc:oup:jecgeo:v:25:y:2025:i:2:p:151-174.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbae024
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    More about this item

    Keywords

    marginal productivity; land use regulation; misallocation; industrial land; minimum investment intensity;
    All these keywords.

    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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