Land "Auction" On Aggregate Investment And Its Structure

Aggregate investment plays an important role both in short-term economic fluctuationsand long-term economic growth. Compared with developed countries、developingcountries and the global average, China suffers from a serious high rate of capitalformation. Land “auction” promoted the land price rise quickly, which made a directeffect on firms’ investment behaviors. At the same time, local governments got more landincome. Under the stimulus of political interests and economic interests, localgovernments reinforced the intervention to local investment, thereby firms’ investmentbehaviors indirectly are influenced.This paper analyzes the mechanism through which land “auction” influences aggregateinvestment. The government’s investment behaviors are briefly analyzed, then using amathematical model we focus on the investment behaviors of state-owned andnon-state-owned firms. Land “auction” increased local government revenue and inspiredlocal government investment, as well as effectively promoted firms’ investment. In general,aggregate investment went up, and this effect was no significant difference amongeast-central-west regions. The investment structure was not influenced by the change frompolicy supports to the investment-led through which local governments influenceaggregate investment, therefore there was no obvious change in the proportion ofstate-owned investment.In the perspective of expanding investment, applying market mechanism publiclyguides firms’ investment that is more efficient than the implicit supports by localgovernments. In addition, the public guides had not negative impact on regional disparity,and the proportion of state-owned investment had not obvious rise. At present China has ahigh rate of capital formation, and the implementation of land "auction " make it higher,only in this way that local governments’ right to govern the land income is restricted canthis problem be solved.