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Understanding the role of homeownership in wealth inequality: Evidence from urban China (1995–2018)

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  • Zhang, Ping
  • Sun, Lin
  • Zhang, Chuanyong

Abstract

Many scholars have evaluated the wealth creation effects of homeownership over different time periods and have agreed on the positive role of homeownership. However, there are no consistent mechanisms to measure the impact of homeownership on wealth inequality. Based on data from 1995 to 2018, this paper finds that the expansion of the homeownership rate in urban China was an equalizing force in the distribution of wealth from 1995 to 2008, driven by the increased homeownership and housing acquisition of low- and moderate-income households (LMIs) during the era of housing reform in the 1990s. The forces were exogenous and dominated by a redistributive logic. In the post-reform era after 2008, the decline in the homeownership rate led to a concentration of wealth distribution that was driven by the widening wealth gap between owners and non-owners, which represented an endogenous market force. The results indicate that there was an apparent discontinuity of the trends of homeownership and wealth inequality because new immigrants could not afford the price of housing in the cities. The wealth position of the middle and lower classes (mainly new immigrant non-owners) was crippled, not only by the inaccessibility of homeownership, but also by the reinforcing effect of the increase in housing prices. This study reveals the different mechanisms of homeownership on wealth inequality and the policy implications for the redistributive effects of the allocation of housing resources.

Suggested Citation

  • Zhang, Ping & Sun, Lin & Zhang, Chuanyong, 2021. "Understanding the role of homeownership in wealth inequality: Evidence from urban China (1995–2018)," China Economic Review, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:chieco:v:69:y:2021:i:c:s1043951x21000754
    DOI: 10.1016/j.chieco.2021.101657
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    References listed on IDEAS

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    Cited by:

    1. Wang, Xize & Liu, Tao, 2022. "Home-made blues: Residential crowding and mental health in Beijing, China," SocArXiv cy8hz, Center for Open Science.
    2. D'Agata, Alessia & Alaimo, Leonardo Salvatore & Cudlín, Pavel & Salvati, Luca, 2023. "Easy come, easy go: Short-term land-use dynamics vis à vis regional economic downturns," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    3. Xize Wang & Tao Liu, 2022. "Home-made blues: Residential crowding and mental health in Beijing, China," Papers 2207.07985, arXiv.org.

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    More about this item

    Keywords

    Wealth inequality; Wealth accumulation; Homeownership rate; Urban housing; China;
    All these keywords.

    JEL classification:

    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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