Infrastructure-Led Urbanisation and Private Land Investment : Evidence from China

Local governments practice infrastructure development as a strategy to attract private investment and promote local economic growth in China. This paper investigates how private sectors react to new infrastructure investment by emphasising private investment in land. Our theoretical model shows infrastructure positively affects private sectors’ land investment and the effect becomes stronger in industrial sector than commercial sector. We use panel data of Chinese major cities between 2009-2017 to verify the model implication and find supportive evidence. In addition, we investigate whether a higher level of land subsidy undermines or amplifies the infrastructure effect on land investment but find weak evidence in either industrial or commercial sectors. Further, we examine how infrastructure effect and subsidy effect influence land allocation. Only subsidy effect plays a significant role in land allocation