Suburbs or Skyscrapers? The Effect of China’s Leasing Market on Housing Decentralization

A key policy instrument fueling China’s rapid urban growth has been the urban land lease, which generates municipal revenue through the sale of land rights to developers. By linking local infrastructure investment to farmland development, the policy creates the potential for shifts in urban form. This paper examines the impact of China’s leasing policy on housing decentralization from 1990 to 2000, exploiting exogenous variation arising from a pilot phase and addressing potential selection bias with a matched difference-in-differences estimator. I find the land leasing policy resulted in a 19.1% decline in construction in the urban core and a 26.2% increase in peri-urban areas.