Go with the Politician

Chinese local leaders are frequently moved across prefectures. By combining local leader rotation data and comprehensive firm land parcel purchase data across prefectures from 2006 to 2016, this paper examines how firm–politician connections affect resource allocation and finds that a firm headquartered in a leader’s previous work prefecture purchases three times more land parcels in that leader’s new governing prefecture than the prefecture-year mean, at half the unit prices. Identification is from within-firm-year variation in various prefectures through exogenous politician rotation. Land usage efficiency is lower for these follower firms’ land parcels. Land allocation distortion is also economically sizable. (JEL D22, D72, O17, O18, P25, P26)