The Role of Informal Housing in Lowering China’s Urbanization Costs

51 Pages Posted: 9 Nov 2020

See all articles by Dongxiao Niu

Dongxiao Niu

Tsinghua University; MIT Center for Real Estate

Weizeng Sun

Central University of Finance and Economics (CUFE) - School of Economics

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate

Date Written: November 8, 2020

Abstract

Over the past 30 years, China has experienced unprecedented economic growth spurred by large-scale rural-urban migration, industrialization, and strong global demand for its cheaply produced goods. This paper argues that an abundant supply of informal housing helped accommodate huge migrant inflows, and contain labor costs. By constructing a unique proxy for city-level informal housing supply elasticity, we examine the linkages between urban housing markets and labor markets (migration flows and wages), with a focus on the low-skilled migrants who are most likely to live in informal housing. We find greater migration inflows in cities with more elastic housing supplies, in both informal and formal sectors. We show that informal housing supply elasticity matters more for low-skilled migrants (those with a high school education or less), and that formal housing supply conditions matter more for high-skilled migrants (those who have a college degree or more education). Cities with greater elastic housing supplies have lower wage levels and faster economic growth. The findings provide a better understanding of the important role the informal housing sector has played in facilitating the low-cost urbanization and industrialization of China.

Keywords: Migration, Informal housing, Housing supply elasticity, China’s urbanization

JEL Classification: R23, R31, R11, J31

Suggested Citation

Niu, Dongxiao and Sun, Weizeng and Zheng, Siqi, The Role of Informal Housing in Lowering China’s Urbanization Costs (November 8, 2020). MIT Center for Real Estate Research Paper No. 7, Available at SSRN: https://ssrn.com/abstract=3726861 or http://dx.doi.org/10.2139/ssrn.3726861

Dongxiao Niu

Tsinghua University

Beijing, 100084
China

MIT Center for Real Estate ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Weizeng Sun

Central University of Finance and Economics (CUFE) - School of Economics ( email )

Beijing
China

Siqi Zheng (Contact Author)

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

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