Investment Promotion, Tax Competition, and Industrial Land Price in China—Evidence from the Corporate Tax Collection Reform
Abstract
:1. Introduction
2. Policy Background and Literature Review
2.1. Policy Background
2.1.1. China’s Fiscal System and Tax Collection System Reform
2.1.2. Industrial Land Market and Local Government Strategic Choice
2.2. Literature Review
3. Model Specification and Data
3.1. Data and Sample
3.2. Model Specification
4. Empirical Analysis and the Impact Mechanism
4.1. The Graphical Evidence
4.2. The Baseline Result
4.3. The Mechanism
5. Robustness
5.1. Identification Check on the Number of Entrants
5.2. Identification Check on Covariates
5.3. The Placebo Test
5.3.1. The Placebo Test on SOEs and FOEs
5.3.2. The Placebo Test on the Cut-Off Date
5.4. Alternative Specifications: Parametric Estimation
5.5. Alternative Explanation
5.5.1. Addressing the Concern of Joining the WTO
5.5.2. Addressing the Concern That Financial Constraints
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
Appendix A
Variables | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) | (14) |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) shock | 1.000 | |||||||||||||
(2) land price | −0.048 | 1.000 | ||||||||||||
(3) outputvlue | −0.268 | −0.009 | −0.268 | |||||||||||
(4) Age | 0.603 | −0.038 | −0.432 | 1.000 | ||||||||||
(5) CIT value | −0.251 | 0.001 | 0.806 | −0.348 | 1.000 | |||||||||
(6) VAT value | −0.307 | −0.024 | 0.873 | −0.464 | 0.786 | 1.000 | ||||||||
(7) CIT rate | −0.036 | 0.017 | −0.033 | 0.016 | 0.242 | 0.014 | 1.000 | |||||||
(8) VAT rate | −0.079 | 0.014 | 0.01 | −0.081 | 0.103 | 0.274 | 0.056 | 1.000 | ||||||
(9) export | −0.147 | 0.078 | 0.343 | −0.17 | 0.287 | 0.28 | 0.012 | −0.025 | 1.000 | |||||
(10) ROA | 0.019 | −0.037 | 0.123 | −0.005 | 0.199 | 0.116 | −0.033 | −0.056 | 0.018 | 1.000 | ||||
(11) SA | −0.436 | −0.026 | 0.814 | −0.763 | 0.688 | 0.798 | 0.001 | 0.09 | 0.316 | −0.092 | 1.000 | |||
(12) Sales margin | −0.088 | −0.005 | 0.21 | −0.123 | 0.406 | 0.275 | 0.054 | −0.018 | 0.048 | 0.454 | 0.102 | 1.000 | ||
(13) debt | −0.034 | 0.027 | 0.052 | −0.051 | −0.026 | 0.037 | −0.007 | 0.061 | −0.002 | −0.038 | 0.087 | −0.120 | 1.000 | |
(14) ltdebt | −0.09 | −0.069 | 0.273 | −0.189 | 0.239 | 0.287 | −0.018 | 0.072 | 0.061 | −0.073 | 0.422 | 0.019 | 0.262 | 1.000 |
1 | The tax authority (local or central) responsible for collecting a company is unlikely to change in most cases. Even if the following situations occur, the authority responsible for tax collection will not change: (a) relocating; (b) merging another firm that is collected by the same authority; (c) changing to the type of firm collected by the same tax collection authority. |
2 | The Ministry of Land and Resources of the People’s Republic of China also publishes the consolidated land transaction data. |
3 | This reform has profoundly influenced China’s fiscal system by changing the way value-added tax is administrated. |
4 | Hahn et al. provided a derivation of the systematic bias in kernel regression estimation, and suggested running local linear regression to reduce the bias [40]. |
5 | The average price of the land is 203.88 yuan/sqm; the average cost of the land is 5,694,900 yuan per parcel. |
6 | In comparison, Wu et al. (2012) found that state-owned enterprises have a 27.4% price discount in Beijing. Chen and Kung conclude that the princeling firms (firms that have political connections) can obtain price discounts ranging from 55.4% to 59.9% [44]. |
7 | We choose these bandwidths because the bandwidths selected by the nonparametric estimation are 1.9, 3.8, and 5.7, respectively. |
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Variable | Definition | Obs. | Mean | S.D. | Min. | Max. |
---|---|---|---|---|---|---|
shock | POEs or COEs established after 1 January 2002 equals to 1, equals to 0 otherwise | 12,531 | 0.539 | 0.499 | 0 | 1 |
land price | The logarithm of land price (Yuan/sqm) | 12,531 | 4.913 | 0.915 | 1.763 | 8.499 |
outputvlue | The logarithm of firm total output value | 12,439 | 11.486 | 1.674 | 8.826 | 16.887 |
Age | Land acquisition date minus establishment date | 12,531 | 4.430 | 4.176 | 0 | 17 |
CIT value | The logarithm of corporate income tax’s revenue | 10,214 | 6.564 | 2.445 | 2.334 | 11.978 |
VAT value | The logarithm of revenue of value added tax | 10,959 | 7.623 | 2.134 | 3.753 | 14.156 |
CIT rate | Effective corporate income tax rates | 11,961 | 0.167 | 0.152 | 0.068 | 0.383 |
VAT rate | Effective value-added tax rates | 9351 | 0.112 | 0.110 | 0.023 | 0.274 |
export | Equals 1 if the firm exports, equals to 0 otherwise | 12,531 | 0.389 | 0.488 | 0 | 1 |
ROA | Return on Assets: Net profit divided by total asset | 11,761 | 0.114 | 0.154 | −0.044 | 0.552 |
SA | Size-age index: −0.737 × log(Asset) + 0.043 × [log(Asset)]2 − 0.04 × life [42] | 11,784 | −2.591 | 0.484 | −3.109 | −1.328 |
Sales margin | Net profit divided by revenue | 12,455 | 0.056 | 0.071 | −0.066 | 0.225 |
debt | Total liabilities divided by total assets | 11,781 | 0.620 | 0.295 | 0.096 | 1.168 |
ltdebt | Long-term liabilities divided by total assets | 10,325 | 0.074 | 0.130 | 0 | 0.443 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Land Price | Land Price | Land Price | Land Price | |
Bandwidth 1 (BW = 1.9) | −0.345 * | −0.357 * | −0.485 ** | −0.467 * |
(0.187) | (0.190) | (0.243) | (0.245) | |
Bandwidth 2 (BW = 3.8) | −0.551 ** | −0.486 ** | −0.591 ** | −0.505 ** |
(0.231) | (0.235) | (0.283) | (0.291) | |
Bandwidth 3 (BW = 5.7) | −0.431 ** | −0.344 * | −0.584 ** | −0.475 ** |
(0.181) | (0.185) | (0.228) | (0.235) | |
Outputvlue | No | Yes | No | Yes |
Age | No | Yes | No | Yes |
CIT value | No | No | Yes | Yes |
VAT value | No | No | Yes | Yes |
N | 9891 | 9891 | 9891 | 9891 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Land Price | Land Price | Land Price | Land Price | Land Price | Land Price | |
Second stage regression | ||||||
CIT rates | −1.738 * | −3.494 *** | −2.732 *** | |||
(1.017) | (1.011) | (0.989) | ||||
VAT rates | −7.673 | −2.553 | −5.116 | |||
(6.121) | (5.405) | (5.592) | ||||
Outputvlue | −0.076 | −0.165 *** | −0.135 *** | −0.488 | −0.206 | −0.347 |
(0.047) | (0.047) | (0.048) | (0.342) | (0.302) | (0.321) | |
Age | −0.029 *** | −0.031 *** | −0.028 *** | −0.030 *** | −0.023 *** | −0.019 *** |
(0.003) | (0.004) | (0.003) | (0.007) | (0.006) | (0.006) | |
Constants | 5.757 *** | 6.825 *** | 5.679 *** | 8.269 *** | 6.561 *** | 6.148 *** |
(0.498) | (0.49) | (0.553) | (2.191) | (1.902) | (1.996) | |
Time fixed effect | No | Yes | Yes | No | Yes | Yes |
Industry fixed effect | No | No | Yes | No | No | Yes |
First stage regression | ||||||
shock | 0.031 *** | 0.034 *** | 0.033 *** | −0.011 ** | −0.011 ** | −0.011 ** |
(0.0044) | (0.0045) | (0.0045) | (0.0050) | (0.0050) | (0.0051) |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Bandwidth | Outputvlue | Age | VAT Value | CIT Value |
Bandwidth = 1.9 | −0.360 | 0.007 | -- | −0.930 |
(0.544) | (0.119) | -- | (1.034) | |
Bandwidth = 3.8 | −0.133 | 0.128 | −0.447 | −0.639 |
(0.347) | (0.194) | (0.485) | (0.630) | |
Bandwidth = 5.7 | −0.008 | 0.299 * | −0.256 | −0.508 |
(0.278) | (0.157) | (0.390) | (0.482) |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | |
---|---|---|---|---|---|---|---|---|---|---|
SOE and FOE | +4 Months | +3 Months | +2 Months | +1 Month | −1 Month | −2 Months | −3 Months | −4 Months | ||
Bandwidth = 1.9 | 0.434 | 0.085 | 0.117 | −0.149 | 0.222 | 0.084 | 0.217 | 0.214 | 0.129 | −0.311 |
(0.367) | (0.470) | (0.208) | (0.537) | (0.337) | (0.278) | (0.225) | (0.24) | (0.222) | (0.239) | |
Bandwidth = 3.8 | 0.304 | 0.341 | 0.199 | 0.099 | 0.244 | −0.225 | 0.245 | 0.294 | 0.039 | −0.316 |
(0.281) | (0.402) | (0.17) | (0.337) | (0.223) | (0.202) | (0.169) | (0.183) | (0.178) | (0.167) | |
Bandwidth = 5.7 | 0.327 | 0.396 | 0.243 | 0.220 | 0.087 | −0.277 | 0.118 | 0.139 | −0.049 | −0.180 |
(0.228) | (0.337) | (0.151) | (0.245) | (0.182) | (0.173) | (0.147) | (0.155) | (0.151) | (0.144) |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
---|---|---|---|---|---|---|---|---|---|
2 Months | 4 Months | 6 Months | 2 Months | 4 Months | 6 Months | 2 Months | 4 Months | 6 Months | |
shock | −0.440 *** | −0.404 * | −0.372 ** | −0.583 * | −0.658 * | −0.525 * | −0.786 ** | −0.812 ** | −0.502 * |
(0.155) | (0.216) | (0.162) | (0.344) | (0.363) | (0.272) | (0.368) | (0.375) | (0.284) | |
|month| | 0.161 | −0.063 | −0.014 | 0.258 | −0.005 | 0.022 | 0.060 | −0.046 | −0.013 |
(0.134) | (0.044) | (0.025) | (0.191) | (0.057) | (0.032) | (0.208) | (0.061) | (0.034) | |
shock*|month| | 0.108 | 0.077 | 0.001 | 0.055 | 0.074 | 0.079 | |||
(0.097) | (0.049) | (0.121) | (0.061) | (0.127) | (0.064) | ||||
Outputvlue | −0.086 | −0.028 | −0.022 | −0.184 | −0.002 | −0.009 | |||
(0.119) | (0.069) | (0.053) | (0.122) | (0.072) | (0.055) | ||||
Age | 0.115 | 0.395 | 0.154 | 0.378 | 0.448 | 0.112 | |||
(0.325) | (0.259) | (0.2) | (0.368) | (0.274) | (0.208) | ||||
VAT value | −0.031 | −0.068 | −0.055 | −0.013 | −0.054 | −0.027 | |||
(0.082) | (0.051) | (0.04) | (0.093) | (0.057) | (0.043) | ||||
CIT value | 0.051 | 0.032 | 0.027 | 0.092 | 0.039 | 0.038 | |||
(0.06) | (0.037) | (0.029) | (0.062) | (0.039) | (0.031) | ||||
Constants | 4.969 *** | 5.065 *** | 5.012 *** | 5.935 *** | 7.075 *** | 6.352 *** | 6.848 *** | 6.214 *** | 5.136 *** |
(0.096) | (0.085) | (0.074) | (1.478) | (1.097) | (0.983) | (1.663) | (1.183) | (1.045) | |
Year Dummy | No | No | No | Yes | Yes | Yes | Yes | Yes | Yes |
Industry Dummy | No | No | No | No | No | No | Yes | Yes | Yes |
R-squared | 0.037 | 0.016 | 0.009 | 0.112 | 0.112 | 0.092 | 0.448 | 0.264 | 0.187 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Land Price | Land Price | Land Price | Land Price | |
Shock | −0.151 *** | −0.163 *** | −0.141 *** | −0.154 *** |
(0.031) | (0.031) | (0.031) | (0.03) | |
Export | 0.042 | 0.068 | 0.009 | 0.033 |
(0.043) | (0.043) | (0.043) | (0.042) | |
Export*shock | 0.017 | −0.035 | 0.022 | −0.032 |
(0.054) | (0.053) | (0.053) | (0.052) | |
Constants | 5.246 *** | 6.111 *** | 4.096 *** | 4.394 *** |
(0.104) | (0.896) | (0.144) | (0.876) | |
Controls | Yes | Yes | Yes | Yes |
Time fixed effect | No | Yes | No | Yes |
Industry fixed effect | No | No | Yes | Yes |
Obs. | 5503 | 5503 | 5503 | 5503 |
R-squared | 0.008 | 0.048 | 0.074 | 0.117 |
(1) | (2) | (3) | (4) | (5) | |
---|---|---|---|---|---|
Bandwidth | ROA | SA | Sales Margin | Liability Rate | Long-Term Liability Rate |
Bandwidth = 1.9 | −0.046 | −0.149 | −0.085 | 0.038 | −0.019 |
(0.073) | (0.133) | (0.102) | (0.22) | (0.072) | |
Bandwidth = 3.8 | −0.053 | −0.005 | 0.002 | -- | 0.025 |
(0.046) | (0.082) | (0.062) | (--) | (0.046) | |
Bandwidth = 5.7 | −0.043 | −0.046 | −0.033 | −0.066 | 0.001 |
(0.054) | (0.103) | (0.078) | (0.154) | (0.055) |
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Song, H.; Sun, G. Investment Promotion, Tax Competition, and Industrial Land Price in China—Evidence from the Corporate Tax Collection Reform. Land 2022, 11, 682. https://doi.org/10.3390/land11050682
Song H, Sun G. Investment Promotion, Tax Competition, and Industrial Land Price in China—Evidence from the Corporate Tax Collection Reform. Land. 2022; 11(5):682. https://doi.org/10.3390/land11050682
Chicago/Turabian StyleSong, Huasheng, and Guili Sun. 2022. "Investment Promotion, Tax Competition, and Industrial Land Price in China—Evidence from the Corporate Tax Collection Reform" Land 11, no. 5: 682. https://doi.org/10.3390/land11050682
APA StyleSong, H., & Sun, G. (2022). Investment Promotion, Tax Competition, and Industrial Land Price in China—Evidence from the Corporate Tax Collection Reform. Land, 11(5), 682. https://doi.org/10.3390/land11050682