Land sale venue and economic growth path: Evidence from China's urban land market

• Empirical evidence suggests that increasing public land auctions boost economic growth.
• This is consistent with the GDP-based evaluation criteria for political promotion in China.
• Public land auctions occur in residential or commercial markets, but not industrial markets.
• This indicates that local officials balance between political promotion and rent seeking.

This paper explores the impacts of different land sale venues on the economic growth path, and hence Chinese local officials' incentive structure and their strategic balance between political promotion and rent creation. By investigating the panel data of 30 provinces and municipalities from 2000 to 2009, empirical results suggest that the proportion of land sale through public auction has positive effects on local GDP growth. The implication is that local officials who choose land sale venues may be judged on the basis of their impacts on local economic performance, because China's political promotion is largely GDP-based. However, descriptive statistics further reveal that local officials tend to sell commercial and residential land but not industrial land through public auction, indicating that local officials may have a strategic balance between their political promotion incentive and rent seeking incentive. In conclusion, it is the incentive of climbing further up the career ladder that drives local officials to give up some of, if not all, their rent seeking incentive in urban land transactions.