An analysis of urban renewal decision-making in China from the perspective of transaction costs theory

Abstract

In China, there is a growing number of urban renewal projects due to the rapid growth of the economy and urbanization. To meet the needs of urban development, urban renewal requires a sound decision-making approach involving various stakeholder groups. However, current urban renewal decision-making is criticized for poor efficiency, equity, and resulting in many unintended adverse outcomes. It is claimed that high-level transaction costs (e.g., a great deal of time spent on negotiation and coordination) are the factors hidden behind the problems. However, few studies have analyzed urban renewal decision-making in a transaction costs perspective. Using the case of Chongqing, this paper aims at adopting transaction costs theory to understand the administrative process of urban renewal decision-making in China. This research focuses on four key stakeholder groups: municipal government, district government, local administrative organizations, and the consulting parties. A transaction costs analytical framework is established. First, the decision-making stages of urban renewal and involved key stakeholder groups are clarified. Second, the transactions done by different stakeholder groups in each stage is identified, thus to analyze what types of transaction costs are generated. Third, the relative levels of transaction costs among different stakeholder groups were measured based on the interview. The empirical analysis reveals how transaction costs occur and affect urban renewal decision-making. Finally, policy implications were proposed to reduce transaction costs in order to enhance urban renewal.