Regional inequality in urban China, allowing for spatial cost of living differences: Evidence from a hedonic analysis of apartment prices

Abstract

Studies of inequality in China typically ignore cost of living differences between areas. Under the Balassa-Samuelson effect, nontradeables cost more in richer areas, so nominal inequality exceeds real inequality. This especially matters in China, where spatial cost of living differences should grow with recent development of urban housing markets. We use new data on apartment prices in 104 cities in China to develop housingrelated spatial deflators. The level of spatial inequality in urban China is overstated by 27% if cost of living differences are ignored. Our hedonic analysis of 41,000individual apartment sales shows that most price variation is between areas, rather than from features of individual apartments. The dominant trend in the reform era is for regional inequality in China to decline, contrary to the common perceptions. In nominal terms, the Theil index for interprovincial inequality in 2016 is just 46% of its 1978 level. The current results imply that the fall in inequality in real terms would be even greater.This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Regional differences in socioeconomic trends: The spatiotemporal evolution from individual cities to a megacity region over a long time series

“…Because of the “reform and opening-up” policy, China has been experiencing rapid changes in recent decades, and the markets related to productivity vary among cities and further exhibit different levels of economic progress [ 3 ]. The existing research has investigated many types of regional differences including residential environments [ 4 , 5 ], housing prices [ 6 ], environmental pollution and transportation [ 7 , 8 ]. These spatiotemporal socioeconomic differences have been regarded as one of the significant challenges in China [ 9 ], especially in megacity regions with urban agglomerations, such as the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).…”