Housing Costs and Real Income Differences across Chinese Cities

Ziyang Chen (1) , Pierre-Philippe Combes (2, 3) , Sylvie Démurger (4, 5, 3) , Xiuyan Liu (6)

1 HKUST - Hong Kong University of Science and Technology
2 ECON - Département d'économie (Sciences Po)
3 CNRS - Centre National de la Recherche Scientifique
4 IAO - Institut d'Asie Orientale
5 ENS de Lyon - École normale supérieure de Lyon
6 Southeast University

We document variations in real income for high-skilled and low-skilled 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 locations. All three components of housing costs-unit land prices, land share in construction, and housing share in expenditure-decrease from the city centre to the periphery, increase with city population, and decrease with city land area, as predicted by theory. Overall, housing costs in China are high and vary a lot across locations. Income gains outweigh housing costs when moving from small to larger cities. However, in the largest cities, housing costs start dominating, especially for low-skilled households, illustrating a bell-shaped curve relationship between real income and city population in China.

Keywords: Housing costs; Income disparities; Land use regulation; Quality of life; City size; Agglomeration economies; China

Domains: Economics and Finance

Ziyang Chen, Pierre-Philippe Combes, Sylvie Démurger, Xiuyan Liu. Housing Costs and Real Income Differences across Chinese Cities. 2023. ⟨hal-04358027⟩