Abstract:
Rocketing housing prices and the consequent unaffordability of houses have become hot social topics. Against this backdrop, this paper uses the micro-data of urban households in China to systematically study the impact of housing prices on local household wages, the mechanism of impacts as well as its impact on local resource allocation efficiency. The study found that the rising house price significantly increases the average wage of local residents through “cost of living effect” and “leisure substitution effect”. Meanwhile, considered that the rising wages that are not based on labor productivity will worsen the efficiency of resource allocation, the paper further explores the relations among housing price, wage and allocation of resources from the perspective of capital labor ratio and factor price distortion. It found that the wage increase caused by housing price rise indeed leads to excessive capital deepening and industrial upgrading, and thus reduces the efficiency of local resource allocation. This research provides family-level micro empirical evidence for the impact of housing prices on local household wages.
Brandt, L., Van Biesebroeck, J., and Y. Zhang. 2012. “Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing”, Journal of Development Economics, 97(2): 339~351.
[19]
Chamon, M. D., and E. S. Prasad. 2010. “Why are Saving Rates of Urban Households in China Rising?”, American Economic Journal: Macroeconomics, 2(1): 93~130.
[20]
Farnham, M., and P. Sevak. 2016. “Housing Wealth and Retirement Timing”, CESifo Economic Studies, 62(1): 26~46.
[21]
Fu, S., Liao, Y., and J. Zhang. 2016. “The Effect of Housing Wealth on Labor Force Participation: Evidence from China”, Journal of Housing Economics, 33: 59~69.
[22]
Han, L., and M. Lu. 2017. “Housing Prices and Investment: An Assessment of China’s Inland-favoring Land Supply Policies”, Journal of the Asia Pacific Economy, 22(1): 106~121.
[23]
Helpman, E. 1998. “The Size of Regions”, Topics in Public Economics: Theoretical and Applied Analysis : 33~54.
[24]
Henley, A. 2004. “House Price Shocks, Windfall Gains and Hours of Work: British Evidence”, Oxford Bulletin of Economics and Statistics, 66(4): 439~456.
[25]
Hanson, G. H. 2005. “Market Potential, Increasing Returns and Geographic Concentration”, Journal of International Economics, 67(1): 1~24.
[26]
Hsieh, C. T., and P. J. Klenow. 2009. “Misallocation and Manufacturing TFP in China and India”, The Quarterly Journal of Economics, 124(4): 1403~1448.
[27]
Krugman, P. 1991. “Increasing Returns and Economic Geography”, Journal of Political Economy, 99(3): 483~499.
[28]
Rabe, B., and M. P. Taylor. 2012. “Differences in Opportunities? Wage, Employment and House‐price Effects on Migration”, Oxford Bulletin of Economics and Statistics, 74(6): 831~855.
