Huan WANG

College of Economics and Management，Shandong Agricultural University，Tai'an 271018，China

1 Introduction

Undoubtedly，through 30 years of rural reform in China，the household contract responsibility system has been full established and farmers have been entitled tomore property rights.The growing realization of farmers'property rights infuses new life into the development of agriculture，farmers and countryside.This is mainly due to production incentive and resource allocation efficiency improvementbrought aboutby themarket-oriented reforms.However，it should be noted that over the 30 years，although the related policies and legal systems have evolved in the direction towards strengthening the protection of agricultural land ownership and landmarketization，ithasnot solved the adverse impactofurban-rural dual land system on farmers'land property rights aswell asmany resulting social conflicts.Since the Third Plenary Session of the 18th CCP proposed the establishment of a unified urban-rural construction land market，the academia and government decision-makers have been engaged in a fierce debate.There are three different perspectives about the allocation of land resources in rural areas.One view is that in the process of land resource allocation，themarket can not play a decisive role，because the land factormarket is different from other resource factor markets and the land usemust go through classifiedmanagement in accordance with the planning［1-2］.Some scholars believe that due to the strong externalities of land resources，even in developed market economies，the definition of land use and construction land use can not be determined by property owners themselves or freemarket negotiations between property owners［3］.Some scholars believe that themain reason for some prominent problems in the allocation of land resources in rural areas lies not in the inadequate marketization but in the lack of rigid constraints on the government planning and use control［4］.The second view is that themarket is a decisive institutional arrangement to efficiently allocate land resources.In this regard，some scholarsmaintain that China's land use is irrational，and the key lies in the lack of regulation of land resource allocation by price［5］.Some scholars hold that the spirit ofmarket-oriented reform is to make rural land and urban land have equal access to the land market transactions［6］.The third view is the compromise between the above-mentioned two views，believing that during the establishment of a unified urban-rural construction landmarket，bothmarketmechanism and governmental mechanism are indispensable resource allocation methods.Some scholars believe that in a unified construction land market，themarket allocation of land resources has played a decisive role，but the government regulation of the land market is necessary and it is limited to themacro guidance and management to correct the possible deviation［7-8］.Some scholars think it is necessary to play the dual role ofmarket and government in the regulation in the process of unifying landmarkets［9］.This paper believes thata unified construction landmarket should be amarket combining effectiveness ofmarket and orderliness of government plan.For the study of thismarket，there is a need to solve the problem of division of labor and cooperation betweenmarket and government.

2 The role and failure ofmarketmechanism in unified urban and rural construction land market

2.1 The role of marketmechanism in land resource allocationIn market economy，all economic activities are directly or indirectly inmarket relations，and all the factors of production and labor products are allocated by the marketmechanism.At present，the rapid development of urbanization and industrialization as well as food security poses a need to retain high-quality farmland，so the non-farm construction land is bound to become a scarce resource.In this sense，when a resource becomes an endogenous variable of economic development，the sustained economic developmentwill begin to be bound by such resource.In the market economy，when a factor becomesscarce and the prices rise，itwill prompt people to save this factor from input-output costsand benefits.Therefore，in the establishment of a unified construction land market，themarketmechanism can play an active role in effectively revealing and finding themarketprice of land in the form of tender，auction，etc.，so that it can reflect the scarcity of land resources from economic aspects，and promote conservation and intensive use of land resources，thus contributing to the establishment of a unified urban and rural construction land market.

2.2 The failure ofmarketmechanism in land resource allocationDue to the public goods property of land，amajor problem is the land use externality.In themarketwithout taking into account the externality of land assets，land prices only reflect the economic value of agricultural land，and ignore the ecological environment，landscape function and food security values of land，making the prices significantly undervalued，leading to excessive agricultural land in themarket，as shown in Fig.1.In Fig.1，curve AC represents the market demand curve in a unified construction landmarket；MPC represents themarginal private cost in a unified land market；MSC represents the marginal social cost.Based on profit maximization，the market only determines the transaction price and trading amountwhen it is at equilibrium according to the pointof intersection（E2）between MPC and AC.In this case，the trading price of agricultural land determined by the market is P2，and the trading amount of agricultural land is Q2.However，if it is based on the goal of socialwelfaremaximization，the price P1and amount of unified urban and rural land market should be price and trading amount Q1determined by the point of intersection（E1）between MPC and AC.At this point，themaximum total socialwelfare OCE1is realized.Clearly，the transaction price of agricultural land（P2）purely determined by market mechanisms is significantly lower than the price（P1）formed in the socialwelfaremaximization conditions.The low price of agricultural land will inevitably lead to land units'preferences for the excessive purchase and extensive use of agricultural land，thereby making land trading amount（Q2）in a unified land marketmuch larger than land trading amount（Q1）under the goal of socialwelfaremaximization.The land trading amount under pure market mechanism is Q2-Q1larger than the land trading amount Q2under the goal of socialwelfaremaximization，thereby leading to a loss of efficiency in resource allocation on the land market.Ifwewant to achieve the land trading amount under the goal ofmaximizing socialwelfare，there isa need to place the land price on the level of P3.Obviously，the price under the market mechanism for the same land trading amount is P2，far below P′2，and the total loss of social welfare is E1E2E′2.This shows that there is a huge efficiency loss in the purely market-driven construction of land market，which is caused by the market failure during the establishment of a unified urban and rural construction land market.

3 The role and failure of government in a unified land market

3.1 The role of government in a unified land marketThe＂decisive role＂of market mechanism is also limited in the resource allocation.Economic theory suggests that a full market mechanism will generate Pareto optimality，and this spontaneous behavior does not require the intervention of any public policy.However，if the conditions required for the normal operation of the marketmechanism can not bemet，it often causes the reality to deviate from theory，resulting inmarket failure.There is a need to introduce the external force to correct themarket failure，and it is government intervention.In a unified urban and rural construction land market，the government's intervention in the land market is necessary and effective.Government can use its functions of public administration，coordination and information provision to give play to its role in dominating the allocation of public agricultural land during the establishment of a unified market，which can effectively compensate for deficiencies of themarketmechanism.

3.2 The failure of government in a unified land marketThe efficiency loss of government regulation is reflected in three aspects.First，if government excessively intervenes in the land market，it is likely to forcibly push agricultural land intomarket in pursuit of political achievements，and in this case，the unequal tradewill inevitably distortagricultural land prices.In Fig.1，the government'smandatory behaviormakes the agricultural land price decline from P2to P3，and agricultural land trading amount increase from Q2to Q3.However，in this case，the resource allocation efficiency of landmarket is lowest，and the total socialwelfare loss is E1E3E″3，greater than the socialwelfare loss E1E2E′3under puremarketmechanisms.For the direct users of the land，the direct welfare losses also reach E2E3E′3，and the land trading amount under government intervention is Q3-Q1more than that under socialwelfaremaximization，and even Q3-Q2more than the amount of excessive land trading caused bymarket failure.Thus，compared with the pure marketmechanism，the government-led agricultural land resource allocation is not improved and the effi-ciency losses are larger.Second，the Chinese government's farmland protection policy will result in government failure.The prevention of excessive agricultural land intomarket is essentially a TR＂quantity control＂，and there will be＂rent＂at this point（Fig.2）.In Fig.2，the landmanagement departments try to reduce the land use amount from Qmto Qe，however，there will be the rental rate of Pe-Pgin this case，and the entire amount of rent caused by the quantity control is about the shaded part in the figure.Finally，the inefficiency of government regulation will also come from the inequality brought by the land use planning to collective economic organizations.Under the current institutional arrangements of the land，the relevant government departments develop the land use plans before land use，resulting in inequality in land rights and interests between different collective economic organizations，so planning has become a resource monopolized by government and provided a rent-seeking opportunity.

4 Coordination between marketmechanism and government regulation

In fact，whether it is the operation of land market led by market mechanism or government regulation，the complexity of market economy needs the effective coordination and cooperation between marketmechanism and government.As put by Samuelson：＂The market and government are two essential parts and the economy can notwork without government ormarket economy.＂A unified construction land market allows the collective construction land use right to directly transfer into themarketand continues to retain collective land ownership，which is away of land resource allocation in line with the internal operating rules of economy，conducive to the total amount control of construction land and farmland protection and regulation of land market order.In the unified urban and rural construction land market，themain role of the government is to use appropriate institutional arrangements to limit the economic activities of various economic players involved in the agricultural land transaction，while the role of market mechanism lies in efficiently allocating the land resources under these restrictions.For the large-scale occupation of land having a significant impact on local economic development，the local governments and various stakeholdersshould raise the land prices to the social price level that can contain social and ecological value on the basis of market prices.In the public rural land allocation，the government mechanism should play a leading role，and rely on the market mechanism and third-partymechanism to amend its failure.However，in determining the total amount controland socialbase price of non-farm construction land，it needs the coordination between government and market.Thus，only when themarketmechanism and government regulation jointly play the role can the unified urban and rural construction land market be established and developed.

5 The security mechanism for synergy of market mechanism and government regulation

5.1 Reform ing the agricultural land property rights system

The integration of urban and rural areas requires the free flow and reasonable configuration of rural land，which is inseparable from the supportof land ownership system.Clear land property relations and clearly defined subject are the basic premise for the market to play a basic role in allocating resources.It is necessary to build the rural collective land ownership system that can adapt tomarketization of property rights in accordance with the requirements of establishing unified urban and rural construction land market，and use laws to endow the farmerswith rural land property rights consistentwith urban land property rights.

5.2 Reform ing the existing land law systemExisting laws and regulations restrict the transfer of rural collective construction land，leading to unsound development of urban and rural land market and damage to the interests of farmers，thereby hindering the role ofmarketmechanisms.It is necessary to amend the land use regulations in Land Management Law and introduce the regulations concerning the transfer of rural collective construction land to fully protect farmers'benefits from collective construction land transfer and ensure that farmers become themain beneficiary.

5.3 Establishing themodern land tax systemIt is necessary to establish sound modern land tax system and properly regulate land subject's interest and behavior relations.According to the principle of equality，there isa need to carry out themarket transaction of land property rights and use standardized tax tool to adjust themarket relations and earnings.The government should set up a certain percentage of land tax，property tax or some policy taxes to correctmarket failures，and provide adequate financial support for the local governments to protect the welfare of landless farmers.

5.4 Transform ing government functionsTomake up for the failure of themarketmechanism and ensure an orderly and healthy unified urban and rural construction land market，the government must change its functions，shift from the role of real estate operators to regulators，trulymaintain and promote the public interest，and use comprehensive economic and legal means to effectively perform macro-control over unified urban and rural construction landmarket.

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