Date of Award
Doctor of Philosophy (PhD)
This dissertation consists of three chapters on China's land market. In the first chapter, I conduct a brief overview of China's land market and explains the institutional background that makes land market a perfect hotbed for corruption.
In the second chapter, I separately identify the roles of information and corruption to explain the difference between two-stage auction and English auction in China’s land market. I construct a structural model involving three types of players, a central government, a local government, and N bidders who can be asymmetric in their information and private costs. I find that first, the two-stage auction is more prone to corruption than English auction when information is asymmetric; and second, the local government is more likely to choose two-stage auction to sell land with lower values and to use the English auction on high-value land to maximize public benefits. Using a detailed data set that covers all land transactions in China between 2007 and 2017, I structurally estimate the model. Results show that land sold by the two-stage auction on average has a value lower than English auction by CNY 343/m2, explaining 43\% of the observed price gap (selection effect); and the remaining 57\% can be explained by the different bidding equilibrium of the two auction formats (corruption effect). I find that connected bidders have a significant information advantage over the unconnected ones, which allows them to bid higher and win more often. However, I also find that connected bidders have higher private costs which suggests a big efficiency loss. Finally, counter-factual results suggest that using English auction only and increasing public information disclosure can significantly reduce corruption and increase land revenues as well as social welfare.
In the third chapter (co-authored with Xi Lu), we study different types of corruption and their implications on land market. Using the China's nationwide anti-corruption campaign starting from 2012 as an quasi-natural experiment, we find that eliminating corruption that helps developers to circumvent red-tape results in lower transaction volume and lower land price; while eliminating corruption in the auction stage results in an increase in land price and promotes market competition. Our findings partly support the ``greasing-the-wheels" hypothesis as certain types of corruption may help to correct market inefficiencies.
Li, Ming, "Essays On China's Land Market" (2020). Publicly Accessible Penn Dissertations. 3747.