Land price regulation and firms' global value chain position: Evidence from China

Abstract

Exorbitant land prices have been a significant constraint on firm growth; however, few studies have explored their effect on firms' global value chain (GVC) positions. By treating the 2007 minimum price policy for industrial land as a quasi-natural experiment, this study estimates the impact of land price regulations on firms' GVC positions. Using a difference-in-differences method with continuous treatment intensity, we find that industrial land price regulation has a remarkably negative effect on firms' GVC positions. This effect is primarily observed in small- and medium-sized enterprises and private enterprises. The mechanism analysis suggests that industrial land price regulation has significantly increased the cost of land purchases by firms, squeezing their investment in innovation and reducing the quality of intermediate inputs, thereby degrading their position in GVCs.