The Housing Price in China: A Hidden Channel of Income Redistribution

• In Event: Open Refereed Roundtables
  In Refereed Roundtable (90 minute): Table 18: Stratification and Economic Inequality

Abstract

This study examines the intrinsic linkage between China's macroeconomic insufficient domestic consumption demand (DCD) and its micro-level housing price phenomenon. By constructing a consumption variable system integrating housing prices, wages, savings, and social retail prices, we analyze panel data from 36 megacities, metropolitans, and large cities (1999-2023) using time-series analysis and system GMM methods. The research quantifies how housing prices constrain household consumption and exert multivariate suppressive effects on DCD through (1) Threshold Identification‌: Calculating the tipping point where housing price impact on consumption share becomes critical; (2) Growth Value Equilibrium‌: Establishing coefficients to measure disparities in growth value between housing prices and wages. Key findings reveal: (1) Suppression Triggers‌: DCD is significantly suppressed when housing price/savings/retail price growth rates persistently outpace wage growth; (2) Anomalous Persistence‌: Suppression persists even when wage growth rate exceeds that of other variables due to growth value disparities; (3) Rate Disparity Effects‌: Consumption remains relatively suppressed when wage growth value surpasses housing prices but lags in growth pace. Granger causality tests confirm housing prices act as a core constraint variable in wage-consumption, savings-consumption, and retail price-consumption relationships. The study demonstrates that housing prices constitute the most critical unidirectional determinant of China's DCD insufficiency — a phenomenon inadequately explained by Western consumption theories.

Authors

• Frank Long

• Fei Xue