JCF | Assistant Researcher Duan Wenqi and Professor Qi Jianhong Reveal the Capital Deepening Effect and Driving Mechanism of Industrial Land Policy

Recently, the paper Do Industrial Land Discounts Raise Firms' Capital-Labor Ratios? Evidence from China co-authored by Assistant Researcher Duan Wenqi, Professor Qi Jianhong from the School of Economics and Professor Tan Yong from Nanjing University of Finance and Economics was published in Journal of Corporate Finance (JCF), an international authoritative journal in the field of finance. This study provides new evidence from the perspective of land policy on how the decline in capital cost reduces the labor share. The study finds that China’s low-price transfer of industrial land has increased firms’ capital-labor ratios through capital deepening, and the effect is concentrated in heavy industry and capital-intensive industries. Excessive price discounts will distort resource allocation, and improving the marketization of land use will help alleviate efficiency losses.

Based on China’s unique land system arrangement where local governments transfer industrial land to enterprises at a price significantly lower than residential land, this paper empirically analyzes the impact of "industrial land price discounts" on enterprises’ factor input choices and factor income shares. The results show that obtaining low-price industrial land will prompt enterprises to increase capital input and expand production scale, thereby increasing their capital-labor ratio. This effect is not universal but concentrated in heavy industry and capital-intensive industries, indicating that the policy has triggered structural industrial adjustment. This adjustment is mainly realized through capital deepening rather than factor substitution. In addition, the enterprise selection effect and industrial agglomeration effect further strengthen the above impact. Although such policies help promote capital accumulation, excessive industrial land price discounts will distort resource allocation among enterprises. Improving the marketization of industrial land transactions will help alleviate such efficiency losses and optimize resource allocation.

Duan Wenqi is Assistant Researcher and Master Supervisor at the School of Economics, Shandong University, and selected into the Future Plan for Young Scholars of Shandong University. His research directions include international economics, digital economy and supply chain. His research papers have been published in Chinese and English journals such as Journal of Environmental Economics and Management, Journal of Corporate Finance, Southern Economic Journal, and China Industrial Economics. He has presided over the Youth Project of the National Natural Science Foundation of China, the Youth Project of Shandong Provincial Natural Science Foundation, and the General Program of China Postdoctoral Science Foundation.

Qi Jianhong is Professor and PhD Supervisor at the School of Economics, Shandong University, Distinguished Professor of "Taishan Scholars" in Shandong Province, Outstanding Young and Middle-aged Scholar of Shandong University, and Chief Expert of the Major Program of the National Social Science Foundation of China. Her main research directions include artificial intelligence and export upgrading, foreign direct investment (FDI), and international trade theory and policy. She has published more than 100 academic papers in CSSCI and SSCI core journals such as Economic Research Journal, The Journal of World Economy, China Industrial Economics, Journal of Financial Research, Economics (Quarterly), Journal of Environmental Economics and Management (JEEM), Journal of Corporate Finance (JCF), and Journal of Economics & Management Strategy (JEMS), and has presided over a number of national-level projects such as the Major Program of the National Social Science Foundation of China, the National Natural Science Foundation of China, and the Humanities and Social Sciences Project of the Ministry of Education.