Fiscal decentralization, political centralization, and land urbanization in China

This study investigates the driving forces of land urbanization in China. Drawing upon insights from the institutional perspective, this study argues that fiscal decentralization tightens local budget constraints, stimulating local governments to urbanize land to relieve fiscal distress. Political centralization triggers interregional competition among government officials for better economic performance, inspiring local governments to employ land development to mobilize more capital investment for growth. Based on official land-use change data from 2002 to 2008 for prefectural cities, and the application of spatial econometric models, this study presents empirical evidence to support these theoretical arguments. Results imply that fiscal and political incentives derived from land development drive China's land urbanization process. This study enriches the urbanization literature by providing an institutional understanding of rapid land urbanization in a transitional economy.