ABSTRACT

China’s land market features a substantial industrial discount: industrial-zoned land is an order of magnitude cheaper than residential land. In contrast to explanations centered on subsidies to industry or promoting industry growth, we emphasize the importance of future tax revenues from the land and find that local public finance incentives can largely rationalize this price gap. Under the “land finance” system, land sales are an important source of revenues for Chinese local governments. We show that local governments, who serve as monopolistic land sellers in China, face a trade-off between supplying residential or industrial land that is determined by the different time profiles of revenues from industrial and residential land sales, local governments’ financial constraints, and the extent of local governments’ tax revenue sharing with other levels of government.

THE SPEAKER

Dr Anthony Lee Zhang joined Chicago Booth as an Assistant Professor of Finance in 2019. He conducts research in finance. His research focuses on household finance, industrial organization, real estate, and web3/defi. Zhang has received a number of honors and awards, including the 2019 AQR Top Finance Graduate Award and the 2018 Facebook Fellowship. Zhang earned a BA in economics from the University of Chicago in 2013, where he received the Becker Friedman Institute Award for Academic Achievement in Microeconomics, and a PhD in Economic Analysis and Policy from the Stanford Graduate School of Business in 2019.