Tax Streams, Land Rents, and Urban Land Allocation

This study examines the fiscal motives influencing municipal governments’ commercial and residential land allocation in urban China, focusing on the effects of business taxation and land value-based charges. Using parcel-level land transfer data to match commercial with residential parcels spatially, we uncover significant price discounts on commercial land due to expected tax flows. A simple structural estimation reveals that while prospective taxes encourage commercial land supply, market price responses and corresponding land value-based charges notably counteract this effect. These results highlight a self-regulatory mechanism in the land market, balancing the fiscal influences of business taxation and land value-based charges.