Rule by Law, Law-Based Governance, and Housing Prices: The Case of China

Abstract

Although some attempts have been made to elucidate the relationship between law-based governance and housing prices, the existing literature still provides limited knowledge about the mediating mechanisms through which law-based governance correlates with housing prices. This study specifically investigates how the association between the rule of law and housing prices is sensitive to public satisfaction, and how the connection is heterogeneous across geographic and socioeconomic groups. Using panel data of Chinese cities over the period 2014–2017, our econometric estimation results indicate that law-based governance may enlarge financial loans and foreign investment and then raise housing prices, which is robust to different specifications. Moreover, the relationship is heterogeneous across city groups and sensitive to the degree of satisfaction with the rule of law quality. Additionally, we demonstrate that the mediating role of financial loans is larger than that of foreign investment. In the stage of emerging economies’ pursuit of the rule of law, our findings have useful implications for local governments to control rapidly rising housing prices by reducing loans and foreign investment.

The Legal, Administrative, and Governance Frameworks of Spatial Policy, Planning, and Land Use: Interdependencies, Barriers, and Directions of Change

“…Their contribution shows that boroughs often do not obtain adequate revenues from spatial development, and the inappropriate policies of local governments cause heavy burdens that threaten to upset their financial balance. Additionally, Chen et al [46] examine the relationships between the legal system, spatial planning, and economy. In particular, using panel data from Chinese cities from 2014 to 2017, their analysis indicates that legal provisions can favor the increase in financial credit and foreign investment, in turn determining an increase in housing prices.…”

The impact of criminal law regulation-based business environment optimization on entrepreneurial spirit and enterprise development

“…The legalized business environment is the booster of China's highquality economic development. In optimizing the business environment, legal norms can reduce policy uncertainty and the randomness of reform, enhancing institutional constraints and stabilizing market expectations (Chen et al, 2021). Therefore, the legalization of the business environment is inseparable from a set of effective, fair, and transparent laws and regulations.…”

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“…When the studies in the literature are reviewed, it is seen that the housing prices is related to many parameters such as population migration (Lin et al, 2018), national income (GDP) (Englund & Ioannides, 1997), foreign investment (Chen et al, 2021), current account deficit (Hepsen & Asici, 2013), housing loan volume (Jiang et al, 2018) and loan interest rates (Akkas & Sayilgan, 2015;Chen et al, 2021), exchange rate (Bahmani-Oskooee & Wu, 2018), inflation (Rehman et al, 2020) and construction costs (Chiwuzie & Dabara, 2021;Geng, 2018;Olanrewaju et al, 2018). Socio-economic stability of a country and growth may be gauged by its capacity to purchase housing.…”