How Does Land Monopoly Reduce Consumption Levels? Evidence from China

Abstract

Understanding the intrinsic relationship between land monopoly and a low consumption rate is of great significance for optimizing the national economic structure and reforming the land system. However, existing studies of low consumption ignore the role of the land system. This study, therefore, theoretically analyzed how a monopolistic land supply system inhibits consumption and empirically tested the causal and influencing mechanisms using the mediated effects model and provincial panel data from 2000 to 2017 in China. The results are as follows: (1) land monopoly significantly reduces the final consumption rate; the results remain robust under different model settings. (2) A heterogeneity analysis indicated that the negative effect of land monopoly on consumption is greater in the central and western regions than in the eastern regions; economic catch-up and government intervention increase such harm as well. (3) Under the land monopoly system, most land income flows to the public sector and urban areas, reducing the share of private sector income and expanding the urban–rural income gap, thus limiting private consumption and total urban–rural consumption. (4) During the 2000-2019 period, the expansion of monopolistic land transfers caused an additional 1.98 percentage points of decline in the final consumption rate, contributing 23.41% of the decline in the final consumption rate. Our findings provide new insights into the causes of low consumption and suggest that economic rebalancing can be achieved by breaking land monopolies through land supply-side reforms and land marketization reforms.