The productivity of land - Evidence from China

If you are interested in joining the seminar, please send an email to Daniel Haerle or Sacha den Nijs.

This paper analyzes the role of production factor land in the production process. Using a novel dataset of 63,998 newly established firms in Chinese manufacturing sector from 2007 to 2014, we estimate a production function with labor, capital and land as inputs. Our estimates of the production suggest the presence of a sizable gap (of on average 207 Yuan/m2or 33 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. Analysis using both all counties sample and contiguous border county-pair sample confirms that larger gaps are significantly associated with more stringent MII regulation. The findings from this research thus suggest that MII regulation limits firms to maximize return from land use and results in the allocative inefficiency. Joint paper with Huub Ploegmakers, Jan Rouwendal, and Xianlei Ma.