Career Incentives, Inter-jurisdiction Competition, and Economic Development Incentives: Empirical Evidence from Land Prices in China

Abstract

How do political incentives influence the use of economic development incentives? This paper provides causal evidence of how politicians’ career incentives and competition among neighborhood jurisdictions affect frequently used development incentives regarding industrial and residential land. Using geographic regression discontinuity design and spatial regression on millions of land transaction data and thousands of local political leaders’ career records, I find politicians’ career incentives lead to a decrease in both the industrial and residential land prices, whereas inter-jurisdiction competition leads to a decrease in industrial and an increase in residential land prices. In contrast to the extensive literature that does not separate the effects of career incentives and inter-jurisdiction competition, I demonstrate the importance of differentiating these two effects when identifying the impact of political incentives on development incentives.