Land Policy and Welfare

This dissertation quantitively studies the impacts of land policies on welfare in China. The first chapter provides the land institutional background in China and the related literature review. There are two specific nationwide land policies of importance on which I focus: 1) The zoning policy for urban land that strictly regulates the amount of industrial and residential land usages; 2) The red-line policy that imposes a minimum 1.2 million square kilometres for agricultural use only. In the second chapter, we build a spatial equilibrium with internal urban structure and a rich pattern of prefectural level trades to quantify to what extent the zoning policy for urban land accounts for the empirically observed high price ratios of residential land to industrial land and how it affects welfare. The third chapter builds a two-sector and two-region model to examine how land misallocation within the agricultural sector due to transaction frictions impair the aggregate agricultural TFP. Importantly, this framework allows the welfare analysis on how the red-line policy interacts with agricultural land misallocation.