Dr. Jipeng Zhang, Associate Professor at the Research Institute of Economics and Management at Southwestern University of Finance and Economics, recently gave a talk at PHBS on Government Intervention, Land Market and Urban Development: Evidence from Chinese cities. The talk outlined one of his current papers in which he investigates how government intervention in land market affects China's urban development, using data from prefecture-level cities between 2000 and 2010. He commenced the talk by first shedding light on internal migration and the choices that migrants make in search of better employment opportunities.
Government intervention enlarges the impact of positive productivity shocks on housing price appreciation, through mainly the government control over residential land supply. Dr. Zhang explained how individuals choose which city to live by maximizing the utility he/she can get compared to the city that they belong to and discussed how his research found no significant evidences that high government intervention constrains population growth and leads to wage increase. Such patterns of urban dynamics can be explained by the fact that migrant workers are the driving force behind China's urbanization, but they have limited housing demand and are not well compensated.
It was interesting to note the policy experiments that Dr. Zhang undertook via this paper. Focusing on a sample derived from Chinese data, it covered some dynamic facets of urban development such as province dummy & spatial distance, travel time, housing price & wage, and household registration reform. The talk stressed certain significant development indicators as he explained how land market distortion is largely driven by government intervention and is less likely affected by the demand factors from residential housing market and the need for industrial development.
We thank Dr. Zhang for introducing the audience to an array of fascinating aspects of real estate economics, a subject that is gaining popularity due to the pressures put by the movement of people on land and resources across the globe calling for effective intervention by governments.
Reported by Gayathri Jagannathan