Author：Yuming Fu; Siqi Zheng; Reongrong Ren
Abstract:
Whereas the rapid urbanization in the past two decades contributed greatly to China’s industrial growth and export, its contribution to China’s domestic demand growth has been more limited. The share of household consumption in national GDP declined from over 50% in the 1980s to about 35% in 2007,partly due to the relative slow growth in wages and partly due to weak incentives for migrant workers, who make up a significant part of the urban labor force, to spend in cities. The lack of consumer spending by a sizable part of urban population is perhaps most evident in the notable presence across cities of a large informal housing sector, offering small flats with most basic living conditions in crowed buildings poorly served by either public or consumer services. At the same time, there has been a notable lack of supply of new homes for low-income families in Chinese cities.
This study focuses on the role that insufficient demand plays in the inadequate housing provision in Chinese cities and seeks to assess the influences of institutional factors on the housing consumption incentives. We do so using data from national large-scale urban household survey in 2007 to estimates the income elasticity of housing demand for different population groups stratified by housing tenure (own vs. rent), skill level (education attainment), migration status (Hukou status and year of residence in current city), industry and occupation, social background and network, etc. We expect the income elasticity to be lower for population groups with lower job and social security in cities.
The findings of this study will shed light on policy instruments for boosting domestic demand growth, which is critical for China to stabilize its economy in the wake of a sever external demand weakening resulting from the current global financial crisis. Policies that improve the job and social security of migrant workers would enhance their willingness to pay for urban housing services and hence improve the domestic demand growth.
