| This thesis explores governments' incentive structures affecting land and housing price movements in China. Research process is as follows: First, it provides an extensive literature review on the changes and conflicts of governments' incentive structures pertaining to financial system, fiscal distribution, and land use rights. These changes and conflicts have reshaped China's land and housing markets in a way that differs from what is explained by classical economic theories originating from western economies. Second, a conceptual framework is established to integrate the impacts of institutional changes and conflicts on land and housing price movements, proposing the research hypothesis and testable propositions. Third, econometric methods including panel data model, cointegration test and Granger causality test are used to empirically test the propositions.;Empirical results show that China's land and housing markets have experienced a prolonged boom with occasional adjustments. The property boom was mainly promoted by local governments. Specifically, local officials are motivated to increase GDP growth, which enhances their chances of political promotion. To achieve this goal, a higher proportion of land for residential and commercial usage is sold by public auction, which has a positive impact on GDP growth and hence land price. Higher land price gives rise to real estate developers' land hoarding strategy which, together with increased public expenditure, contributes to the housing price escalation. Meanwhile, the central government cautions inflationary pressure and social welfare. Affordable housing project was introduced to mediate the property boom, though its effect is insignificant.;In conclusion, the diverse goals between central and local governments have significantly affected land and housing prices in China. When the central government takes control, the market turns to adjustment; when local governments gain advantage, the market experiences a period of boom. As commodity market being established, the central government's influence on market adjustment is gradually lessened; while local governments' impact on market boom is increasingly intensified. |
