Go with the Politician

By combining data from 1,055 local government leaders who had been required to move with data on 1 million firm land transactions from 2006 to 2016 in China, we find that firms followed their headquarter prefecture politician’s move by purchasing 76% more land parcels, with 54.52% lower unit prices. Land usage efficiency, measured by light intensity, is also lower for these follower firms’ land parcels, later on. We suggest that cronyism explains our findings. The anti-corruption campaign since 2012 instead led to higher land purchase concentration. Identification is from within firm variation at various prefectures through politician turnover.