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The Subnational Penn Effect: Evidence from China

Author

Listed:
  • Huayi Yu

    (Department of Land & Real Estate Management, School of Public Administration, Renmin University of China, Beijing 100872, China)

  • Xiang Tang

    (School of Economics, Peking University, Beijing 100871, China)

  • Rui Wu

    (Department of Land & Real Estate Management, School of Public Administration, Renmin University of China, Beijing 100872, China)

Abstract

In this paper we estimate relative consumer price levels as of 2008 for 36 major Chinese cities, using an innovative method purposely designed to rectify three main defects of the existing literature, which are (1) the under-representation of marketized services in the sample data, (2) biased consumption weights, and (3) a mismatch between sample classification and consumption weights. Our estimation results show the ¡°subnational Penn effect¡± as defined by Tang (2012), i.e., strong inter-city correlations among population size, the relative price level, per capita nominal and real income, and human capital stock, thereby showing that the theoretical model of inter-city price dispersion proposed by Tang (2012) is applicable in China. Our conclusion, methodology, and estimation results have important implications for various aspects of the Chinese economy including the regional, urban and real-estate economies.

Suggested Citation

  • Huayi Yu & Xiang Tang & Rui Wu, 2012. "The Subnational Penn Effect: Evidence from China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 7(4), pages 627-650, December.
    • Handle: RePEc:fec:journl:v:7:y:2012:i:4:p:627-650
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-001-012-0029-9
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    Cited by:

    1. Huayi Yu & Yanfen Huang, 2016. "Regional heterogeneity and the trans-regional interaction of housing prices and inflation: Evidence from China’s 35 major cities," Urban Studies, Urban Studies Journal Limited, vol. 53(16), pages 3472-3492, December.
    2. Yihua Wang & Tomoko Kinugasa, 2022. "The relationship between demographic change and house price: Chinese evidence," International Journal of Economic Policy Studies, Springer, vol. 16(1), pages 43-65, February.

    More about this item

    Keywords

    regional price dispersion; subnational Penn effect; agglomeration economies;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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