Foreign direct investment, fiscal decentralization and land conflicts in China

- We examine the impact of FDI and fiscal decentralization on land conflicts.
- A panel data set for 30 provinces is used for the empirical analyses.
- We use data on illegal land use cases to proxy land conflicts.
- We find that that FDI has a positive and significant impact on illegal land use when fiscal decentralization is large.

Land disputes have been an important risk to social stability in China since the turn of the century. This paper uses provincial data on illegal land uses during the period 1999-2010 as a proxy for the intensity of land conflicts to investigate the effects of foreign direct investment (FDI) and fiscal decentralization on jurisdictional land conflicts. The results show that the FDI growth rate has a positive and significant impact on the growth rate of illegal land use when there is a high degree of fiscal decentralization. We thus provide evidence supporting the hypothesis that regional competition for FDI, as shaped by fiscal decentralization, tends to raise conflicts over land in China.