Three Red Lines and Fiscal Substitution in China.dta

This study investigates the impact of China’s 2020 ‘Three Red Lines’ policy on local government forfeiture revenues using a difference-in-differences approach and panel data from 296 cities (2012–2023). Results show that the policy led to a 29.7% increase in forfeiture revenues in cities heavily reliant on land finance. The effect is particularly pronounced in well-developed eastern regions. These findings provide novel insights into the fiscal spillover effects of real estate regulation and highlight how local governments adapt revenue strategies under fiscal stress.