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Spatial Price Differences and Inequality in the People's Republic of China: Housing Market Evidence

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  • Chao Li

    (Chao Li, PhD candidate, Department of Economics, University of Waikato.)

  • John Gibson

    (John Gibson, Professor, Department of Economics, University of Waikato and Motu.)

Abstract

The large literature on regional inequality in the People's Republic of China (PRC) 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 different regions in the country 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. Moreover, a focus on tradable goods such as food may be misplaced because of the emerging literature on the rapid convergence of traded goods prices within the PRC 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 nontraded items, and especially from housing given the fixity of land. In this paper we use newly available data on dwelling sales in urban PRC 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. © 2014 Asian Development Bank and Asian Development Bank Institute.

Suggested Citation

  • Chao Li & John Gibson, 2014. "Spatial Price Differences and Inequality in the People's Republic of China: Housing Market Evidence," Asian Development Review, MIT Press, vol. 31(1), pages 92-120, March.
  • Handle: RePEc:tpr:adbadr:v:31:y:2014:i:1:p:92-120
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why China’s growing cities do not threaten farmland
      by John Gibson in East Asia Forum on 2015-01-16 05:00:27

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    Cited by:

    1. John Gibson, 2016. "Poverty Measurement: We Know Less than Policy Makers Realize," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 3(3), pages 430-442, September.
    2. Gaddis,Isis, 2016. "Prices for poverty analysis in Africa," Policy Research Working Paper Series 7652, The World Bank.
    3. Gluschenko, Konstantin & Karandashova, Maria, 2016. "Price Levels across Russian Regions," MPRA Paper 75041, University Library of Munich, Germany.
    4. Chao Li & John Gibson, 2016. "Pareto's Law and City Size in China: Diverging Patterns in Land and People," Working Papers in Economics 16/09, University of Waikato.

    More about this item

    Keywords

    housing; inequality; prices; spatial; China;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O15 - Economic Development, Innovation, 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, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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