Anticorruption Enforcement and Sale Mechanism Choice in China's Land Market

TL;DR

This study investigates how China's 2012 anticorruption campaign affected land sale methods and prices, revealing that indictments reduced corrupt listing practices and increased land prices, using advanced causal inference models.

Contribution

It is the first to apply Blackwell and Yamauchi's marginal structural models with fixed effects to estimate causal effects of anticorruption on land sale mechanisms and prices in China.

Findings

Indictments decrease the likelihood of land being sold via listing.

Indictments lead to higher land sale prices.

Corruption deterrence impacts land sale method choice and pricing.

Abstract

Upon taking office in late 2012, Chinese President Xi Jinping launched one of the most intensive anticorruption campaigns in the history of the People's Republic of China. Prior to the campaign, China's land market suffered from corruption, particularly surrounding sale method selection (auction versus listing). Listing is a two-stage sale mechanism that prior research has identified as more susceptible to corruption, leading to lower prices. This paper examines the campaign's impact on land allocation, focusing on whether corruption influences the choice of sale method and, in turn, land sale prices. This paper is the first to utilize Blackwell and Yamauchi (2021, 2024)'s marginal structural model with fixed effects in the inverse probability of treatment weighting model; absorbing time-invariant unobserved confounding and utilizing a set of time-varying covariates as controls, this model can estimate causal effects in the land sale case. I find that indictments in a prefecture cause a statistically significant drop in the probability that land is sold via listing$\unicode{x2014}$an effect that is further compounded when indictments occur in consecutive months. Sensitivity analyses indicate that any violations of the identification assumptions would bias estimates towards zero, confirming the negative effect. A second marginal structural model shows that both mean and median land sale prices increase in the presence of indictments. Together, these results suggest that the anticorruption campaign not only deterred actual corrupt allocation practices, but also impacted the discretionary use of listings.