The Distributional Effects Associated with Land Finance in China: A Perspective Based on the Urban–Rural Income Gap
Round 1
Reviewer 1 Report
Comments
In developing countries, the emerging new consensus in the literature brings knowledge about the heterogeneity of agents and on income distribution, of wealth and consumption. These are necessary conditions for understanding the sources of economic fluctuations, the transmission of economic shocks and the impact of public policies on economic well-being (e.g., Blundell, 2014; Kaplan and Violante, 2018).
Land credit is a type of rural loan provided by the Government, which aims to fulfil one of the biggest dreams of rural households: the purchase of land. Those who have little or no land can buy property through it. In practice, this happens through public programs. It is a government initiative that should provide for the granting of rural credit to rural workers and producers with little or no land. Natural resources can be used to invest in basic resources for the implementation of productive projects and to hire technical assistance and rural extension.
As written in the substance of the article, in fact, the taxes have an impact on economic activity but, at the same time, changes in GDP also affect tax revenues. In addition, there are factors that simultaneously influence GDP and tax revenue and which, if omitted, lead to biased estimates of taxation impacts. Another problem is related to the uncertainty regarding the moment of reaction and the horizons considered by economic agents.
The methodology is in accordance with the statistical data used and the discussion of results, as the conclusions are the aftermath of this articulation with the policy recommendations mentioned by the authors.
Suggestions
Instead of “land finance” I would prefere you to write “Real estate development”. Real estate development is an activity characterized by an initial period of investment, with no income, followed by sales that are typically concentrated in one or two tax periods and is intrinsically related to and dependent on bank financing. Perhaps for reasons of interpretive language, the meaning of the concept may be the same.
Another point is the fact that currently, the real estate developer often acquires the asset (building to be rehabilitated or land) and the bank finances its construction. In the case of more solid promoters with greater experience demonstrated in the market, and projects that present greater potential for profitability (and lower risk), it is possible for a bank or a public institution to finance up to the maximum of 1/3 of the acquisition price of the asset.
The third point the authors must consider is that according to market practice or the state, each real estate project must be developed by a company created specifically for this purpose (commonly referred to as “special purpose vehicles”). There are several reasons, based on multiple concerns, for this to be the case. On the one hand, the aim is to mitigate risk, thus avoiding potential contamination between projects (in case something goes wrong). The main objective is that the output is sustainable and durable over a long time.
Fourth, identified an increase in inequality of income and consumption over the life cycle of families should be referred by the authors in the article, about the Chinese reality of the 275 cities. This statement raises many questions, e.g.:
a1) in the case of income, inequality decreases in higher age groups after retirement age?
b2) In intergenerational terms, the data point to a decrease in consumption inequality through all generations?
c3) specifically, when compare the different generations when they were the same age, the generations more recent ones systematically present an inequality of consumption smaller?
d4) What about the exploitation of the public transfer system, the offer of work of the various members of the household and the families' access to credit market or the public support (e.g., Heathcote et al., 2014; Blundell, 2014)? Is any of them effective?
Author Response
Please see the attachment.
Author Response File: 
Author Response.pdf
Reviewer 2 Report
The reviewed article is interesting, draws attention to an interesting element, factually correct, correct references to source material
Please indicate the originality of the presented research. How can the results of the analysis be used? Do the results of the analysis advance current knowledge and to what extent? Can the results of the analysis be used in other countries and to what extent?
The abstract should be structured. Its structure should include 1) the research problem (the topic of the study is mentioned in general terms), 2) the purpose of the study (to be more specific), 3) the method and research area, 4) a general description of the results of the study (general conclusions without describing their contribution to economic practice)
An introduction that enables the reader to understand the research problem. The introduction should clearly show (1) what we know (key perspectives, theoretical and empirical findings) and what we do not know (the main unsolved puzzle, controversy or paradox surrounding this study or why it should be addressed and why it matters), (2) what we learn from the study and how the study fundamentally changes, challenges or improves understanding of existing scientific knowledge.
This should include the purpose of the study, the research questions, the years and the area of study.
Method and material. This section should be structured.
Methods should be adequately described to show how the study was conducted to improve clarity and transparency. Explain the stages of the study with an adequate explanation of the methods. What are the advantages and disadvantages of the chosen research methods. Why the indicated methods were chosen.
Results correct, clearly understandable.
Discussion more clearly indicated. Refer to the ban of other authors.
Summary. In the conclusion section, please indicate the originality of the research presented. How can the results of the analysis be used? Do the results of the analysis advance current knowledge and to what extent? Can the results of the analysis be used in other countries and to what extent? Emphasise the importance of the research - clearly show how the results contribute to new knowledge. How can the results of the study be used in future research?
Author Response
Please see the attachment.
Author Response File: Author Response.pdf
Reviewer 3 Report
This paper focuses on analyzing and exploring the effect of land finance on the urban-rural income gap (URIG) based on the data of 275 prefecture-level cities in China from 2014-2017. In the empirical models used in this paper, Thiel index refers to the urban-rural income gad, and , takes the ratio of land grant income to public finance income as a proxy variable for land finance. The control variables include the level of economic development, industrial structure, financial development, the level of opening up, authorities intervention, and education level. The results show that land finance significant widens the URIG, there is significant heterogeneity of the effect of land finance on the URIG. The paper does provide an empirical verification of the impact of land finance on the URIG in China, but there are some issues in the literature review, theoretical basis, technical methods, and result discussion.
1. This paper lacks a comprehensive and clear understanding of the relevant academic research literature. It not only ignores a review of relevant research on land management and fiscal policies in China, but also does not provide sufficient discussion on the influencing factors of URIG. Most of the content elaborates on the practices of local governments in land acquisition and transfer many years ago. These practices have undergone significant changes in recent years. In fact, the current land acquisition and development in China has given great attention and protection to the interests of farmers.
2. This paper uses traditional regression analysis models to verify the correlation between land finance and urban-rural income gap, and discusses the heterogeneity of the impact of land finance on urban-rural income gap, including the heterogeneity derived from land transfer methods and spatial heterogeneity. Simple technical methods make it difficult to guarantee the rigor and scientificity of the results.
3. In the section of Discussion, this paper mentions that “this study finds that in the eastern region and the middle region, land finance has a widening effect on URIC, and the widening effect is more significant in the eastern region, while it has no effect in the western region, And this ranking is consistent with the ranking of the level of economic development of each region, where the eastern region has the best level of economic development, the middle of the country is second, and the western region is the worst. ” in row 361-365. However, in row 371-372, the paper describes that “this study finds that the effect of land finance on the widening of URIC is more significant in small cities, while it has no effect in large and medium-sized cities. ” Firstly, what does “URIC” mean? Secondly, the level of economic development in large and medium-size cities must be best than that in small cities, why the regional heterogeneity is completely opposite to the heterogeneity of city size. This is very confusing.
4. The role of control variables in the results was ignored in the discussion.
5. There have been many errors in English writing, and the readability of the paper is poor.
The relevant terminology is not clear enough. There are many capitalization errors. Is the abbreviation 'URIC' correct. Too many complex sentences appear. Some sentences are expressed inaccurately and unclear.
Author Response
Please see the attachment.
Author Response File: Author Response.pdf
Round 2
Reviewer 3 Report
Most of the issues I am concerned about have been responded to and revised by the author in the revised version of the manuscript. However, the implication of the study should be highlighted in the conclusion.
The language is not very standard. It should be more scientific.
Author Response
Dear reviewer,
We have revised your comments and the relevant content has been highlighted in red. See line 522-526.
Kind regards,
Meirong
