An Analysis of Transaction Costs Involved in the Urban Village Redevelopment Process in China

Dinghuan YUAN, Yung YAU, Wenyi LIN*, Jianxin CHENG

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review


A well-designed institutional arrangement for urban village redevelopment projects (UVRPs) must consider transaction costs, but academic papers discussing it from the perspective of transaction cost economics are lacking. This paper applies theory of transaction cost economics to analyse the types and sizes of transaction costs and who bears these costs during redevelopment when implementing UVRPs in China. This paper finds that transactions in UVRPs have high asset specificity, high uncertainty and low frequency, which easily results in high levels of transaction costs. Based on 439 UVRPs collected from seven cities, this paper finds that UVRPs implemented with top–down institutional arrangements remain prevalent in China. Based on semi-structured interviews with participating parties, this paper proves that the sizes and types of transaction costs and the distribution of these costs borne by different participating parties vary with the change of stage under dissimilar institutional arrangements. This implies that a high level of transaction costs at one stage does not necessarily mean the costs stay high at another stage. Transaction costs have essential implications for process efficiency, so policymakers need to consider transaction costs and use hybrid institutional arrangements to enhance the efficiency and sustainability of policies.
Original languageEnglish
Article number692
Issue number5
Publication statusPublished - 22 May 2022

Bibliographical note

This article belongs to the Special Issue Housing as a Nexus of Unaffordability, Illegality and livability)

This research was funded by the National Natural Science Foundation of China under grant number 72104090; the Philosophy and Social Sciences of Guangdong Province under grant number GD19YGL16; the Fundamental Research Funds for the Central Universities under grant numbers 22JNZS21, 21JNZS21 and 19JNQM11; the 2019 Innovation Projects of General Universities in Guangdong Province under grant number 2019WTSCX002.

The authors sincerely thank the government officials and villagers who explained the general redevelopment of UVRPs.


  • China
  • institutional arrangements
  • transaction characteristics
  • transaction costs
  • urban village

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