Host: Tianshu Chu ,Associate Professor, RIEM
Time: 10:00-11:30, May10, Friday
Venue: Seminar room 305,RIEM Building, Guanghua Campus
Abstract: Thispaper sets up a structural general equilibrium model of house market based onthe current literature of urban economic theories. We explicitly model themonopolistic supply of residential lands, which is consistent with the legalinstitutions of China. We apply this structural model to the data in Chinesehouse market, and have two findings. First, Chinese house supply fails to meetthe rising demand, which generates persistently high growth rates of the rentsat city fringe. Second, the house supply displays the pattern consistent withthe structures of monopoly market. The equilibrium quantity of houses doesn'trespond to the demand shocks. This implies that the supply elasticity ofChinese houses is zero. We therefore detach the effects of monopoly landmarkets by constructing an index. We define the index as the dependence oflocal governments on selling lands as their major sources of governmentrevenues, and use this index to measure the intention of local governments toimplement their monopoly power of the land markets. We find that the moreimportant is the income of selling lands for the local governments, the moreobtuse is the house supply to the demand shocks. Furthermore, after we detachthe effects of land finance by using the index, the equilibrium quantity ofhouses does display the positive response to the demand shocks, which isconsistent with the theoretical results.
