Essays on China's Urban Land Allocation and Spatial Economics

Abstract

This dissertation examines the multifaceted impacts of local government land allocation decisions on urban welfare, resource distribution, and demographic trends in China. In the first chapter, we document a systematic and geographically dispersed price gap between industrial and residential land that contradicts the predictions of traditional efficient allocation models. By developing a quantitative spatial model in which local governments balance the allocation of fixed land quotas to attract both firms and workers, we show that weak labor mobility leads to an oversupply of industrial land—particularly in cities with higher productivity and amenities. An algorithm inspired by deep learning techniques is used to solve and calibrate the model, revealing that significant reductions in industrial land shares could enhance allocation efficiency. The second chapter investigates the unintended demographic consequences of these land allocation policies. Employing a dynamic spatial overlapping-generation framework, we capture the interplay between governments' prioritization of industrial land, public education spending, and household family-planning decisions. The analysis demonstrates that the industrial discount in the land market indirectly raises housing prices, thereby reducing fertility rates and contributing to China’s population decline. Counterfactual simulations suggest that a shift toward a free land market could potentially narrow the fertility rate gap by over 16%, while also intensifying geographic disparities in fertility rates across cities. Together, these studies contribute to a deeper understanding of the trade-offs inherent in urban land allocation decisions. The findings offer valuable policy insights for enhancing urban resource allocation, improving economic efficiency, and addressing demographic challenges in rapidly developing urban regions.