Spatial Misallocation in Chinese Housing and Land Markets / Yongheng Deng, Yang Tang, Ping Wang, Jing Wu.

Format:

Book

Author/Creator:

Deng, Yongheng.

Contributor:

National Bureau of Economic Research.

Tang, Yang.

Wang, Ping.

Wu, Jing.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27230.

NBER working paper series no. w27230

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Housing and land prices in China have experienced dramatic hikes over the past decade or two. Moreover, housing and land prices have also become more dispersed across Chinese cities. This paper intends to explore how housing and land market frictions may affect not only the aggregate but also the spatial distribution of housing and land prices and hence the extent of spatial misallocation. We first document the spatial variations of housing and land market frictions. In particular, larger tier-1 cities receive less housing and land subsidies, compared to tier-2 and tier-3 cities, whereas land frictions have been mitigated over time. We then embed both types of market frictions into a dynamic competitive spatial equilibrium framework featured with endogenous rural-urban migration. The calibrated model can reasonably mimic the price hikes in the data. Our counterfactual analysis reveals that, in a frictionless economy, the levels of housing and land prices would both be higher; while the housing price hike would slow down, the land price would grow more rapidly. Moreover, the housing price would not be slow down unless housing frictions can be largely mitigated.

Notes:

Print version record

May 2020.