Misallocation in the Chinese land market
构建空间均衡模型量化中国土地市场扭曲造成的福利损失，发现土地政策导致高生产率企业难以进入大城市，解释了城市规模偏小现象，并指出协调的土地与劳动力改革可提升福利并缩小区域差距。
Abstract We develop a spatial equilibrium model to quantify welfare losses from land market distortions in China. In the model, heterogeneous firms in various sectors choose their locations across regions with costly trade, frictional labour migration and land market distortions. We match land transaction and firm‐level survey data to estimate land market distortions for firms. Misallocation arises when similar firms are faced with land prices that effectively prevent productive firms from establishing in large cities where they can benefit from agglomeration forces and access higher productivity. Our framework incorporating land market distortions also sheds light on the mystery of China's undersized big cities, a phenomenon noted by Au and Henderson (2006) and Chauvin et al. (2017). Our estimates suggest large negative effects of land policies on the economic welfare in China. We end with a counterfactual exercise revealing that a coordinated land and labour migration reform would generate welfare gains and reduce regional inequality.