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Rural-Urban Migration and House Prices in China

Author

Listed:
  • Carlos Garriga
  • Aaron Hedlund
  • Yang Tang
  • Ping Wang

Abstract

This paper uses a dynamic competitive spatial equilibrium framework to evaluate the contribution of rural-urban migration induced by structural transformation to the behavior of Chinese housing markets. In the model, technological progress drives workers facing heterogeneous mobility costs to migrate from the rural agricultural sector to the higher paying urban manufacturing sector. Upon arrival to the city, workers purchase housing using long-term mortgages. Quantitatively, the model fits cross-sectional house price behavior across a representative sample of Chinese cities between 2003 and 2015. The model is then used to evaluate how changes to city migration policies and land supply regulations affect the speed of urbanization and house price appreciation. The analysis indicates that making migration policy more egalitarian or land policy more uniform would promote urbanization but also would contribute to larger house price dispersion.

Suggested Citation

  • Carlos Garriga & Aaron Hedlund & Yang Tang & Ping Wang, 2020. "Rural-Urban Migration and House Prices in China," Working Papers 2020-045, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:103942
    DOI: 10.20955/wp.2020.045
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    Keywords

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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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