Sylvie Démurger (Institut d'Asie Orientale)

 
Sylvie Démurger 
Institut d'Asie Orientale

Housing Costs and Real Income Differences across Chinese Cities

Coauthors: Ziyang Chen, Pierre-Philippe Combes et Xiuyan Liu

Abstract 

We document variations in real income for skilled and unskilled households across Chinese cities. Using comprehensive data on land parcel transactions and survey data for land development and household expenditure, we compute a city-specific housing cost index and we assess how it varies across cities. All three components of housing costs --unit land prices, land share in construction and housing share in expenditure-- decrease from the centre to the periphery of cities, increase with the city's population size, and decrease with the city's land area, as predicted by theory. None of the three components is significantly affected by the presence of migrants. Overall, housing costs in larger cities are substantial and they partly offset nominal income gains. A bell-shaped curve between real income and population is obtained, with housing costs higher than nominal income gains in the largest cities only. Real income gains from moving to larger cities are greater for high-skilled households.