The Reform of Housing Policies in Urban China and Household Consumption

32 Pages Posted: 13 Jul 2021

See all articles by Yu Li

Yu Li

Chinese Academy of International Trade and Economic Cooperation (CAITEC)

Kai Liu

Renmin University of China, School of Economics

Xiaoying Lu

Renmin University of China, School of Economics

Ben Zhe Wang

Macquarie University, Macquarie Business School

Xuan Zhou

Renmin University of China

Date Written: July 12, 2021

Abstract

Since 1998, housing policies in urban China have gone through a series of reforms that transformed housing allocation from a centralized welfare housing system to a market-oriented housing system. Through the process welfare dwelling residents are eligible to purchase their existing dwelling at a subsidized price. This access to welfare housing drives a wedge in the cost of acquiring property and subsequently can imply a substantial difference of net housing wealth and housing debts. This paper investigates the impact of access to welfare housing on household consumption by using a large household-level survey data from 2010 to 2018. Our results indicate that households owned welfare housing in the past had a higher level of consumption than households without access to welfare housing, and the benchmark estimate shows owning welfare housing can increase consumption by 11.5 per cent. Our results also suggest that this positive impact on consumption decays over time, and is particularly significant for low-consumption households and for those residing in first-tier cities.

Keywords: housing policies, public housing, consumption, wealth effect

JEL Classification: D12, E21, H40, P36, R31

Suggested Citation

Li, Yu and Liu, Kai and Lu, Xiaoying and Wang, Ben Zhe and Zhou, Xuan, The Reform of Housing Policies in Urban China and Household Consumption (July 12, 2021). Available at SSRN: https://ssrn.com/abstract=3884645 or http://dx.doi.org/10.2139/ssrn.3884645

Yu Li

Chinese Academy of International Trade and Economic Cooperation (CAITEC) ( email )

Ministry of Foreign Trade
Beijing
United States

Kai Liu

Renmin University of China, School of Economics ( email )

China

Xiaoying Lu

Renmin University of China, School of Economics ( email )

China

Ben Zhe Wang (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Xuan Zhou

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

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