Land Use Regulation, Land Reclamation, and Industrial Productivity : Evidence from China

We study the impact of China's land use regulation on firm productivity. Our theoretical analysis shows that a restriction on the supply of industrial land will reduce the number of operating firms and harm their average productivity. We employ a natural experiment based on geography and find that after the central government tightened non-agricultural land use in 2004, a significant productivity gap emerged between coastal and neighboring inland counties. The productivity loss amounts to 25-27% of China’s overall productivity growth. Further investigation shows that up to 40% of the productivity loss was due to lower level of industrial agglomeration