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ID182771
Title ProperLocal land supply and fiscal incentives for R&D
Other Title Informationevidence from a quasi-natural experiment in China
LanguageENG
AuthorZhang, Chengsi ;  Liu, Yuanyuan ;  Liu, Guanchun
Summary / Abstract (Note)Whereas numerous studies have evaluated the effects of public research and development (R&D) support programs and R&D tax incentives on private R&D, little is known about local governments' fiscal incentives for R&D. In this study, we build a conceptual framework to clarify the critical role of local land supply in relation to fiscal expenditure on R&D. We treat the establishment of China's nine Land Supervision Bureaus in 2006 as a quasi-natural experiment, and run a difference-in-differences regression to identify causality. The results show that local governments allocate more fiscal expenditure to R&D in response to land-use supervision, which monitors illegal land granting behaviors, and this effect is stronger in cities where leaders have higher political career incentives and cities with greater fiscal decentralization. Moreover, we find that land-use supervision increases the probability and scale of firms' access to government subsidies for R&D; thus, enhancing regional innovation capacity. Our findings document that China's land resource is a curse for its innovation-driven growth as it impedes local governments' fiscal incentives for R&D.
`In' analytical NoteChina Economic Review Vol. 68, Aug 2021: p.101630
Journal SourceChina Economic Review 2021-07 68, 68
Key WordsResearch and Development ;  China ;  Fiscal Incentives ;  Quasi-Natural Experiment ;  Land Resource Curse