Research On Land Finance Problem : Causes And Governance

Against the backdrop of rapid urbanization of our country, the land urbanization develops faster than the population urbanization and the expansion of land finance of the local governments. Public and academia pay more and more attention to the situation. It is a crucial problem to the economic and social development of our country that whether the development of urbanization have been affected by the land finance, which has emerged together with the development of urbanization. How is the land finance model formed upon local governments? What is the deep institutional cause for this phenomenon? In what way and to what extent does it affect the urbanization of our country? These problems are focused on by this paper.This paper analyses the institutional change and behavior of local government, which eventually promotes land finance. The results of theoretical analysis have been empirically proven by the econometric model. Conclusion shows that yardstick competition among the local governments and pressure of budget and soft budget influences the institutional incentives and constraint, which leads the local government to land finance model. Therefore, the model of land finance could endanger the sustainability of urbanization in China. Proposals such as reconstructing the rivaling system, changing the standards of Performance Evaluation, promoting the prominent taxation of local government and hardening budget constrains have been put up at the end of this paper, which could correct behaviors of local government. Further reform to the institution of land expropriation and land remising is critical to eradicating the phenomenon of land finance.