Spatial Price Differences and Inequality in China: Housing Market Evidence
AbstractThe large literature on regional inequality in China is hampered by incomplete evidence on price dispersion across space, making it hard to distinguish real and nominal inequality. The two main methods used to calculate spatial deflators have been to price a national basket of goods and services across China’s different regions or else to estimate a food Engel curve and define the deflator as that needed for nominally similar households to have the same food budget shares in all regions. Neither approach is convincing with the data available in China. Moreover, a focus on tradable goods like food may be misplaced because of the emerging literature on the rapid convergence of traded goods prices within China that contrasts with earlier claims of fragmented internal markets. In a setting where traded goods prices converge rapidly, the main source of price dispersion across space should come from non-traded items, and especially from housing given the fixity of land. In this paper we use newly available data on dwelling sales in urban China to develop spatially-disaggregated indices of house prices, which are then used as spatial deflators for both provinces and core urban districts. These new deflators complement existing approaches that have relied more on traded goods prices, and are used to re-examine the evidence on the level of regional inequality. Around one-quarter of the apparent spatial inequality disappears once account is taken of cost-of-living differences.
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Bibliographic InfoPaper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 13/06.
Length: 25 pages
Date of creation: 15 Mar 2013
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housing; inequality; prices; spatial; China;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-30 (All new papers)
- NEP-CNA-2013-03-30 (China)
- NEP-GEO-2013-03-30 (Economic Geography)
- NEP-LTV-2013-03-30 (Unemployment, Inequality & Poverty)
- NEP-MAC-2013-03-30 (Macroeconomics)
- NEP-TRA-2013-03-30 (Transition Economics)
- NEP-URE-2013-03-30 (Urban & Real Estate Economics)
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