The Impact of Real Estate on Wealth Accumulation and Social Inequality in China

1. IntroductionOver the past four decades, China has undergone significant economic and social transformations due to its Reform and Opening-Up Policy. However, the dual structure of the economy, which combines market mechanisms with socialist institutional elements, continues to influence wealth distribution (Hu & Gao, 2023; Meng, 2007). Housing wealth, a major component of private household wealth in China, has been shaped by historical redistribution policies and subsequent market reforms (Piketty, Yang & Zucman, 2019; Li & Zhao, 2007; Wu, Bian & Zhang, 2019). Despite various studies on wealth inequality, only a few studies have examined the long-term effects of socialist institutions and subsequent privatization of the market, and via this channel its role in overall wealth accumulation (Zhang, Sun & Zhang, 2021; Long, 2023; Wang, Ren, Yi, Huang & Ma, 2020). This study aims to fill this research gap by analyzing the impact of institutional factors on housing wealth and their broader implications for wealth distribution in China.2. Research ObjectivesThis research seeks to address the following key questions: -How do institutional factors such as the household registration system (hukou system), employment in state-owned enterprises, and Communist Party membership influence housing wealth in China? -What is the impact of housing wealth on total household wealth? -How have these effects evolved over time, particularly in the context of recent institutional reforms?3. MethodologyThe study employs data from the China Family Panel Studies (CFPS) and the Statistical Yearbook of China (2010-2020) to analyze the long-term effects of institutional factors on housing wealth. A combination of Ordinary Least Squares (OLS) regression models and instrumental variable (IV) estimations is used to address potential endogeneity issues. Key instrumental variables include parental Hukou status, employment in state institutions, and Communist Party membership, which provide exogenous variation in housing wealth in order to estimate causal effects of household housing wealth on overall wealth. The study distinguishes between urban and rural areas to capture disparities in wealth distribution.4. Expected ContributionsBy investigating the relationship between institutional factors and housing wealth, this study aims to contribute to the broader discourse on wealth inequality in China. It seeks to determine whether institutional barriers, such as the Hukou system and employment in state-owned enterprises, continue to influence real estate ownership and wealth accumulation, and if these Effects became more pronounced over time.5. Potential ImplicationsIf the study finds that institutional factors significantly impact housing wealth, it would suggest the persistence of historical barriers to wealth accumulation. Conversely, if socialist institutions are shown to be only minor driver of wealth distribution, it would indicate a shift away from socialist-era inequalities. The findings of this study could provide valuable insights for policymakers, particularly in shaping housing finance policies, Hukou reforms, and broader wealth redistribution strategies.