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Spatial Misallocation in Chinese Housing and Land Markets

Author

Listed:
  • Yongheng Deng

    (University of Wisconsin-Madison)

  • Jing Wu
  • Yang Tang

    (Nanyang Technological University)

  • ping wang

    (Washington University in St.Louis)

Abstract

Housing and land prices in China have experienced dramatic growth in the past decade. In conjunction with the rapid growth, housing and land price dispersion across Chinese cities have also become more dispersed. This paper intends to explore how market frictions affect the aggregate as well as the spatial distribution of prices. We first document the spatial variations of housing and land market frictions. Larger cities receive less housing and land subsidizes. Land frictions are improving over time. We then embed both frictions into a dynamic competitive spatial equilibrium framework featured with endogenous rural-urban migration. The calibrated model can reasonably mimic the price growth in the data. The counter-factual results suggest that the frictionless economy leads to a slower housing price growth but faster land price growth. In addition, land frictions tend to inhibit land price growth while housing price growth will slow down if only housing frictions are eliminated.

Suggested Citation

  • Yongheng Deng & Jing Wu & Yang Tang & ping wang, 2019. "Spatial Misallocation in Chinese Housing and Land Markets," 2019 Meeting Papers 1351, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1351
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    Cited by:

    1. Charles Ka Yui LEUNG, 2022. "Housing and Macroeconomics," ISER Discussion Paper 1197, Institute of Social and Economic Research, Osaka University.
    2. Garriga, Carlos & Hedlund, Aaron & Tang, Yang & Wang, Ping, 2021. "Rural-urban migration and house prices in China," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    3. Henderson, J. Vernon & Su, Dongling & Zhang, Qinghua & Zheng, Siqi, 2022. "Political manipulation of urban land markets: Evidence from China," Journal of Public Economics, Elsevier, vol. 214(C).
    4. Yan Song & Jiang Zhou & Yingjie Zhang & Dingxin Wu & Honghai Xu, 2022. "How Much Are Amenities Worth? An Empirical Study on Urban Land and Housing Price Differentials across Chinese Cities," Land, MDPI, vol. 11(6), pages 1-16, June.
    5. Fei, Xuan, 2022. "Trade liberalization and structural changes: Prefecture-level evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 103-126.
    6. Charles Ka Yui Leung & (single author only), 2021. "Handbook of Real Estate and Macroeconomics: An Introduction," ISER Discussion Paper 1137, Institute of Social and Economic Research, Osaka University.

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    More about this item

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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