Rural-Urban Migration, Structural Transformation, and Housing Markets in China
This paper explores the contribution of the structural transformation and urbanization process to China's housing-market boom. Rural to urban migration together with regulated land supplies and developer entry restrictions can raise housing prices. This issue is examined using a multi-sector dynamic general-equilibrium model with migration and housing. Our quantitative findings suggest that this process accounts for about 80 percent of urban housing price changes. This mechanism remains valid in extensions calibrated to the two largest cities with most noticeable housing booms and to several alternative setups. Overall, supply factors and productivity account for most of the housing price growth.
The authors are grateful for stimulating discussions with Costas Azariadis, Rick Bond, James Bullard, Kaiji Chen, Morris Davis, Jang-Ting Guo, Berthold Herrendorf, Tom Holmes, Alexander Monge-Naranjo, Yongs Shin, Don Schlagenhauf, B. Ravikumar, Paul Romer, Michael Spence, Stijn Van Nieuwerburgh, Yi Wen, and the seminar participants at the Federal Reserve Bank of St. Louis, Fengchia University, Nanyang Technological University, National Chengchi University, National Taiwan University, National University of Singapore, Washington University in St. Louis, the China Economics Summer Institute, the Econometric Society Asia Meeting, the International Real Estate Conference in Singapore, the Midwest Economic Association Meeting, the Society for Economic Dynamics Meeting, the NBER conference on the Chinese Economy, the Shanghai Macroeconomic Workshop, and the Society for the Advancement of Economic Theory Meeting. The views expressed herein do not necessarily reflect those of the Federal Reserve Bank of St. Louis, the Board of Governors, or the Federal Reserve System. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.