Promotion Pressures of Local Leaders and Real Estate Investments: China and Leader Heterogeneity

Abstract

Chinese local officials have strong incentives to stimulate economic growth in the pursuit of promotion. However, the connection between promotion pressure of local officials and investment in the real estate market has not been rigorously explored. By using the panel data of local leaders (municipal party secretaries or mayors) from 2002 to 2010, this paper investigates the correlations between local leaders’ promotion pressures and growth in real estate investments. Empirical results show that local leaders’ promotion pressures are significantly and positively correlated with the growth of the real estate market. Furthermore, the positive effect of promotion pressure on real estate development is significant if the leader is young or born locally, whereas this effect is insignificant if the leader is older or not a native. Our findings provide new evidence on how local leaders may strategically intervene in local economic activities.

Local education expenditures and educational inequality in China

“…We lay particular emphasis on two institutional and fiscal contexts. First, decision-making over budgets is de-facto devolved to local governors, whose career trajectories are heavily dependent on the economic growth of their region (Li and Zhou (2005), Chen et al (2022)). We propose that the budget preferences of these governors are age dependent with younger officials generally more inclined to invest in large and quantifiable infrastructure projects rather than public service provision.…”

“…Yuan and Zhang (2015), for example, offer convincing evidence that municipal education spending in China is exogenous to household preferences.6 For example, the recent study ofChen et al (2022) shows that young officials tend to be more ambitious in promotion and react positively to the promotion pressures and set more aggressive economic goals.…”