Industrial Land Protection and Allocation Efficiency: Evidence from Guangdong, China

Industrial land allocation in China has been distorted for a long time by local governments providing land at a low price to attract manufacturing activities. This study explores whether an industrial land protection policy can reduce the distortions and, hence, improve land allocation efficiency in China. Using industrial land zoning and protection policies adopted in some cities in Guangdong province, this study finds that industrial land allocation efficiency is indeed improved after the implementation of protection policies, reflected in higher land prices and greater land use intensity. However, the improvement is smaller for industrial land provided to advanced manufacturing industries, indicating that local governments continue to rely on a strategy of offering cheap land to compete for high-end manufacturing activities. Further analysis suggests that the adoption of industrial land protection in one region generates a positive spillover effect on industrial land allocation efficiency in neighboring regions. Overall, this study provides new evidence on the effectiveness of industrial land protection.