China & World Economy / 104–126, Vol. 27, No. 4, 2019

Regional Competition in China under the Price Distortion of Construction Land:
A Study Based on a Two-regime Spatial Durbin Model

Yongjian Liu, Hong Geng

Abstract

This study examines regional competition in China by considering the spatial correlation and spillover effect of construction land price distortion using a two-regime Spatial Durbin Model to investigate the patterns and trends of the competition between 285 cities in China from 2006 to 2015. The study finds: (i) price distortion of construction land is a common phenomenon but the distortion index generally shows a declining trend; (ii) regional competition through construction land price distortion shows a weakly intensified pattern, although the competition patterns in the four regions of China varied; and (iii) the intensity of competition between regions was lower during the 12th Five-year Plan compared to the 11th Plan. The intensity of competition between cities was also lower inside than outside urban agglomerations. These results provide policy implications for remedying the price distortion of construction land and promoting regional coordinated development.

Key words: construction land, price distortion, regional competition, spatial Durbin model, two-regime model
JEL codes: C15, Q24