1. Introduction
According to the Seventh National Population Census data released by China’s National Bureau of Statistics in 2021, the total number of migrants in China was 375 million in 2020, representing a significant but weak increase in the number of migrants compared to 2010. It reflects the general trend in a gradual slowdown in the growth rate of urbanization in China and the urgency of new urbanization. Therefore, the 14th Five-Year Plan for the Implementation of New Urbanization proposes to promote a new urbanization strategy with people as the core, to promote the civilization of the migrants continuously, and to improve the urbanization pattern with urban clusters as the main form and the coordinated development of large, medium and small cities and towns.
Migrants’ settlement intentions refer to the migrants’ intention to be permanently in the inflow city and not to return to their original residence. It is an indicator of whether the migrants are willing to stay permanently in the inflow city, which reflects not only the tendency of individuals to stay permanently in the inflow city at a micro level but also the attractiveness of the inflow of city at a macro level as well as the migration pattern and urbanization of the migrants in the region and even the whole country [
1]. Therefore, it is of great practical significance to research the settlement intentions of migrants for China to build a new type of urbanization and to provide some references for other developing countries. However, local governments need economic strength and fiscal revenue to make migrants want to stay in an area. Since China’s 1994 tax reform, most of the local government’s revenue has come from land finance: the sale of land to generate revenue. However, at the same time, the policy of land finance may push up housing prices, causing certain social and economic impacts, and the impact of this impact on the migrants’ settlement intentions in the city has been less discussed, which is the gap this study is trying to fill.
Why do people choose to migrate? In fact, population migration is a complex issue. Any study that takes one factor as the main cause needs to be revised, and various disciplines have given different theoretical explanations. These theories can be divided into two categories, macro and micro theories. The macro theories mainly include Lewis’ dual economic theory [
2], the laws of migration by Ravenstein [
3], and push-pull theory proposed by Lee [
4]. The micro theories mainly include the human capital theory and the new economics of migration theory. The research on the settlement intentions of the mobile population is abundant, and researchers have analyzed the causes and mechanisms of migration from economic, social, human capital, residential, and macro policies [
5]. Among them, economic factors have been considered by many researchers as the most important factors [
6,
7], but some researchers have put forward different views. Firstly, economic factors are not always more important than others; some high-income earners in the U.S. do not have settlement intentions [
8]. Secondly, the impact of economic factors (such as income growth) on the settlement intentions of migrants is not linear but inverted U-shaped after reaching a certain threshold and will inhibit the settlement intentions of migrants [
9]. In terms of social factors and human capital factors, social identity [
9], social ties [
10], social integration [
11], and even vocational-skills training [
12] all have the significant effects on the settlement intentions of migrants. Finally, some residence factors, like housing security or homeownership, also have a significant effect on the settlement intentions of migrants [
13,
14].
Land finance is a policy that local governments in China adopt to increase fiscal revenue. It includes land tax, land transfer income, land rent, and business tax for real estate and construction, with land transfer income accounting for the largest share. Because land ownership in China belongs to the government; any individual, company, or group can only own the right to use the land; land transfer only includes the right to use, not ownership. It is a special fiscal system in China that has been seen as a powerful contributor to China’s economic growth in the past years [
15] and was also the variable of interest in this study. Many studies on land finance have focused on urban research, and researchers have found that land finance has a positive impact on urban economic development. However, the intensity of the impact is related to the size of the city, and not all cities are affected equally: some cities may have a negative impact [
16]. In addition to the economic impact, land finance significantly increases the speed of urban expansion, and cities under greater financial pressure have been more affected. Another important impact of land finance is on housing prices. A study showed very rapid and significant increases in housing prices in China [
17]. The rapid rise in housing prices will have a negative impact on society. First, rising housing prices are spatially contagious, affecting neighboring provinces or cities [
18]. Then, a study suggested that the rising housing prices are a generative impetus for the frequent occurrence of criminal offenses [
19]. Rising housing prices can also lead to a labor “crowding-out” effect, inhibiting urban diversification and weakening the effect of industrial structure upgrading [
20].
We find that there seems to be a lack of discussion of the relationship between the two in the literature on settlement intentions and on land finance. In fact, land finance, as an important policy implemented in China, has an all-embracing effect on urban residents, and, therefore, this study was dedicated to remedying the shortcomings of past studies on this issue. The most discussed macro policy in the early years was household registration [
21], where researchers believed that the absence of an incoming household registration was the most important, if not the only, reason why migrants failed to settle in the incoming area. However, this view is problematic because migration is common in some countries where there is no household registration [
22,
23]. In recent years, other aspects of macro policies have attracted the attention of researchers, such as public service or social security, all of which have an impact on the settlement intentions of migrants [
24,
25]. The increase in public service is conducive to the increase in the settlement intentions of migrants, and this increase more significantly impacts the settlement intentions of women, less-educated, and rural migrants [
26]. It is worth mentioning that some researchers are keen to identify the apparent negative effect of housing prices on migrants’ intention to settle [
27], but this is not the essential reason because, for the government, the increase in housing prices is just a chain reaction after the adoption of land finance, so further research is needed in this regard.
Land finance is a policy factor that has driven China’s rapid economic growth over the past decades and was taken into account in our study. There needs to be more discussion on land finance. Compared with previous studies, the possible marginal contributions of this study are as follows: First, based on the perspective of land finance, this study enriches the understanding of the influence on the settlement intentions of migrants. Second, through theoretical analysis and empirical tests, the study attempted to determine the influence of land finance on the settlement intentions of migrants. Third, through theoretical analysis and empirical tests, we attempted to explore the heterogeneous characteristics of land finance on the settlement intentions of migrants and its specific mechanisms of action to help the academic community enrich the corresponding theoretical foundation.
2. Theoretical Analysis and Research Hypotheses
In this section, we analyze the research questions of this paper using four hypotheses. First, Hypothesis 1 corresponds to the first research question of this study: Does land finance affect migrants’ settlement intentions, and if so, does it have a positive or negative effect? Second, Hypotheses 2–4 correspond to the second research question of this study: What is the mechanism of action of land finance on migrants’ settlement intentions? Through which variables does it affect settlement intentions?
Since the 1994 tax reform, China’s local governments have received significantly lower taxes from the central government; at the same time, the central government also put a piece of land revenue, which at that time was still insignificant, into the hands of local governments, and no one seemed to have thought that this move would make local governments’ revenue increase instead of decrease. Local governments have used this opportunity to rapidly expand cities and promote infrastructure development. China is moving forward at speed unprecedented in human history. China has been in a period of rapid urbanization. Since the reform and opening up, a large number of people have flowed from the countryside to the cities, and data show that by the end of 1991, China’s urban population had increased to 312.03 million, an increase of 80.9% over 1978, with an average annual growth of 5.8%. The urbanization rate reached 26.94%, 9% higher than in 1978. At the same time, the history of the economic rise of Western countries shows that the less-efficient tax finance could not fully meet the demand for primitive capital in the start-up phase of urbanization. Therefore, after combining the experience of Western countries with Chinese characteristics, China chose to complete the original accumulation of capital in the initial stage of urbanization through land finance, rapidly expanding infrastructure investment, attracting foreign investment, changing the urban landscape, and promoting the development of the local economy [
15].
In fact, the positive role of land finance as a means of financing for local governments in the early days should be fully recognized. Through fiscal decentralization, the central government triggered healthy competition among local governments to build land, boosting infrastructure construction and economic growth, and most of the country’s population enjoyed the benefits of development. However, as China’s economy and urbanization have slowed, local governments have not found other ways to expand their fiscal revenues significantly, so they continue to increase the area of land transfer and increase their reliance on land finance, which poses serious problems. First, land finance creates houses as investment properties. Buying a city’s real estate is equivalent to buying the city’s stock and the city’s economic growth. This is followed by a rapid rise in housing prices; as the government has no way to suppress housing prices through the logic and means of the general commodity market and capital, capital will madly rush into the real estate market, attracting speculators and other industries, especially the manufacturing industry. This will have a great impact and cause financing difficulties; only those industries related to real estate can achieve growth, thereby further squeezing the employment opportunities of people in other industries and reducing the income of the migrants and social integration. This, in turn, reduces migrants’ settlement intentions [
28,
29]. Second, after the financialization of real estate, due to its high entry barrier, the wealth gap between those who do not acquire property and those who own property will widen more and more. With the rapid rise in housing prices, those who have a home can rapidly increase their assets even if they do not work hard, while those who do not have a home can hardly keep up with the growth of housing prices even if they work hard, so that the poverty gap will increase with the rise in housing prices [
30]. This poverty gap in a city makes the migrants not see the possibility of class mobility, which affects the social and economic status and social mentality of the migrants and reduces the migrants’ settlement intentions. Third, land finance affects the financial capacity of local governments, reduces the willingness and motivation of governments to invest in other industries, and causes a waste of resources. Local governments continue to invest a large amount of resources that should be used for other industries into real estate and blindly expand cities. On the one hand, these behaviors hinder the upgrading of the industrial structure and regional technological innovation, and, on the other hand, urban expansion leads to air pollution and environmental destruction, which damages the health of migrants and ultimately reduces their willingness to settle [
31]. Based on the above analysis, this paper proposes research Hypothesis 1.
Hypothesis 1 (H1).
Land finance can reduce the settlement intentions of migrants.
The most intuitive and biggest impact of land finance on migrants is the rapid rise of housing prices, and it is difficult for the income growth of the migrants to keep up with the speed of property price growth. Under the current tax system in China, the maximum marginal tax rate of 45% is applied to labor, while the tax rate for capital is fixed at 20%. We find that the labor tax is obviously higher than the capital gains tax. Under such circumstances, migrants are increasingly unable to afford local housing, and China’s household registration system determines a huge gap between those with and without housing in accessing public services such as education, medical care, and cultural products provided by local governments. The long-standing gap has created housing pressure. According to the theory of political economy, housing is a necessity for household labor reproduction, and the housing pressure caused by rising housing prices affects the labor reproduction of households, which then affects the income and consumption of laborers [
32]. In addition, most of the migrants take out loans to buy houses, and the mortgage accounts for a high proportion of their income. This housing pressure places pressure on the rest of migrants’ consumption and savings and, at the same time, makes them increase their work hours in exchange for labor compensation, which reduces their job stability and psychological health [
33]. This finally leads to a decrease in the migrants’ settlement intentions. Based on the above analysis, this paper proposes research Hypothesis 2.
Hypothesis 2 (H2).
Land finance can reduce settlement intentions by increasing the housing pressure on migrants.
Social security, as a form of redistribution provided by the state or government to residents through laws or institutions, can effectively narrow the poverty gap and change the distribution of wealth. It is also an important means for China to move toward common prosperity [
34]. This narrowing of the gap is not only reflected between high- and low-income earners but also between generations of young and middle-aged people or older people, between the east and the middle or west, and between individuals over their lifespan. Narrowing the income gap among the groups can significantly improve the subjective socioeconomic status of migrants, improve subjective well-being [
35], and thus enhance subjective well-being and perception of social equity. In addition to income, social security can also improve human capital investment or sustainable economic growth [
32,
36]. According to social support theory, a formal social support system can improve people’s ability to cope with difficulties and alleviate negative pressure. The stronger the social support network of a person, the better they will be able to cope with challenges from the environment. So, social security can play a hedging role and improve settlement intentions in the face of the negative effect played by land finance on migrants. Based on the above analysis, this paper proposes research Hypothesis 3.
Hypothesis 3 (H3).
Social security plays a positive moderating role in the impact of land finance on migrants’ settlement intentions.
According to housing class theory, different groups within cities can be divided into six categories based on differences in access to housing. These six categories have significant differences in their ability to use markets and policies (economic income), which also reflects the inequitable distribution of resources [
37]. The literature also shows that the difference between the housed and the unhoused is significantly reflected in the settlement intentions and that this difference affects the social integration of migrants [
38,
39], income inequality, and subjective well-being [
40,
41]. For those who own a home, the increase in housing prices due to land finance has a “wealth effect” on them, increasing their rental income, financial support, and thus their consumption power. For those who do not own a home, the increase in housing prices caused by land finance has a “house poor effect” on them, forcing them to reduce their expenses, increase their working hours, and reduce their consumption opportunities in order to make a down payment. The double effect of income and consumption leads to a significant difference in the settlement intentions between those who own a home and those who do not. Therefore, homeownership can act as a hedge against the negative effect of land finance on migrants and increase settlement intentions. Based on the above analysis, this paper proposes research Hypothesis 4.
Hypothesis 4 (H4).
Homeownership can moderate the negative effect of land finance on the migrants’ settlement intentions.
5. Discussion
Land finance has greatly contributed to China’s rapid economic growth over the past decades. China’s local governments have received large amounts of revenue through this policy. Then, they built up a good urban infrastructure and public services such as education and health care, high-speed rail, airports, and seemingly perfect economic data, which officials were very satisfied with. However, this was not sustainable. China’s vast land area has led to a huge amount of land owned by local governments. China’s administrative system ensures that land ownership will always belong to them, so it can be said that local governments are in a monopoly position in land transactions. Therefore, even if they face unsustainable land finance policies, they will still choose to continue them. After all, officials have a term of office, and economic growth during their term of office, as long as it is good, will create the possibility of promotion.
Any policy can bring both benefits and harms, and the same is true of land finance, which has tended to be ignored in previous studies concentrating on economic growth and urban expansion brought about by land finance [
48], even though some scholars recognized the harms but focused on measures of urban management. These points are partially correct, but economic growth is not a numbers game. The purpose of economic development is to make the lives of those of the nation better. We should focus on the impact of a policy not only on cities but also on individuals, especially the impacts on some disadvantaged groups. In China, the biggest disadvantaged group is these migrants. These migrants have a specific official term in China: the floating population. The biggest difference between them and natives is that they do not have a household registration, and because they do not, many urban public services are unavailable. For them, more research is necessary.
Moreover, in the cross-country comparison, we found some peculiarities specific to China. First, other countries lack this policy of land finance. In the United States, for example, the largest source of revenue for state governments is individual income tax, while in China, it is the revenue from land transfers. Second, in China, land ownership is in the hands of the government, which only sells the right to use it during land transactions, while in the U.S., both can be sold. The U.S. has property taxes, while China does not. So, we can see that China’s land transfer revenue is more like a hidden tax on the people. These characteristics mean that land finance’s negative impact on migrants’ settlement intentions may only occur in China. In other regions, such as the U.K., a study showed that high housing prices in potential destinations discourage migration and that an important determinant of migration is the cost of housing [
49], which is similar to some of the points made in this study but did not involve a discussion of land finance. These specific qualities were also of interest to this study.
6. Conclusions and Policy Implications
We empirically investigated the effect of land finance on the settlement intentions of migrants based on data from the 2017 China Migrants Dynamic Survey (CMDS) and matched macro-level data from prefecture-level cities by building a Probit model, and the following conclusions were drawn: First, land finance significantly reduces the settlement intentions of migrants. This finding remained robust after using different estimation methods and considering the issue of endogeneity. Second, the effects of land finance on migrants’ settlement intentions differ across individuals or regions: the migrants in the rural-to-urban mobility pattern suffer fewer negative effects than the migrants in the urban-to-urban mobility pattern, and high-skilled laborers suffer fewer negative effects than low-skilled laborers. In terms of the south and north, land finance in the south has a significant in terms of north and south; the “crowding-out” effect of land finance on the migrants in the south and the “spillover” effect of land finance on the migrants in the north are significant. In terms of east, middle, and west, the “crowding-out” effect of land finance on the migrants was found. In terms of urban hierarchy, land finance has a serious “crowding-out” effect on the migrants in large cities, while the effect is not significant for small cities and below. Finally, housing pressure, social security, and housing property rights are important mechanisms through which land finance affects the settlement intentions of migrants. The negative effect of land finance on migrants’ settlement intentions is transmitted through the mediating variable of housing pressure. Social security and housing property rights, as moderating variables, can effectively mitigate the negative effect of land finance on the settlement intentions of migrants and reduce its influence.
Based on the above conclusions, the following suggestions are made in the context of China’s new urbanization construction: (1) On the national level, local governments should gradually reduce their reliance on land finance, adhere to the concept of “housing without speculation” and “people-oriented development”, protect the rights and interests of the migrants, narrow the gap between them and the household population, gradually remove the shackles of the household registration system on labor mobility, and promote equalization of basic public services. At the same time, the middle and local governments should speed up the construction of corresponding laws and regulations, improve the management of the real estate market, and gradually pull back real estate from the financial and capital markets to the general commodity market by means of “equal rights for rent and sale” and “rent first, sell later”, and vigorously combat speculators and house flippers. (2) Local governments should pay attention to the heterogeneous characteristics of the migrants and give priority to protecting their rights and interests. For low-skilled laborers and rural-to-urban migrant individuals, they should introduce corresponding policies to adjust the industrial structure and promote inclusive employment. As for each region, the eastern, southern, and large cities should take the lead and rapidly reduce their reliance on land finance, while the middle, western, northern, and third-tier cities and below should review the situation, respect the objective law of economic development, and appropriately adjust their land finance policies. (3) We need to vigorously promote the construction of subsidized housing, increase the number and coverage of subsidized housing, reduce the housing pressure of the migrants through subsidized housing, gradually reduce the share of the commercial housing market and have its share filled by subsidized housing, and reduce housing inequality. At the same time, we should gradually expand social security from broad coverage to full coverage, establish a sound social security system, improve the protection capacity, and promote the equalization of social security services through the construction of a unified national social security platform and the use of digital means to promote common prosperity. (4) Local governments should gradually move away the current land finance model, where land transfer revenue is the main source of public fiscal revenue, and find a new source of taxation by establishing a property tax-based taxation model that can adapt to China’s current economic development trend.