“flying Land”: Intergovernmental Cooperation in Local Economic Development in China

Meina Cai (University of Wisconsin-Madison)

Abstract: The mainstream literature explaining economic growth in China emphasizes competition across local governments. Departing from this literature, this paper examines a widespread but largely overlooked phenomenon of cooperation in land quota transfers across jurisdictions, referred to as “flying land.” I argue that cooperation in land quota transfers is an institutional innovation arising from the conflicting goals for local governments of promoting local economic growth and fulfilling land quota requirements imposed by the central government. Land quota transfers across jurisdictions help local governments with land scarcity overcome the bottleneck in gaining the construction land necessary to promote further economic growth as well as help local governments with land abundance gain revenue and investments. The paper concludes that intergovernmental competition occurs between jurisdictions with similar economic profiles. When an important endowment, land, is factored in, cooperation emerges between jurisdictions with different economic profiles.

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