City Size and Household Consumption in China

Chengri Ding and Zhi Li ()
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Chengri Ding: Urban Studies and Planning Program, University of Maryland, College Park, MD 20742, USA
Zhi Li: Academy of Macroeconomic Research, Institute of Spatial Planning & Regional Economy, NDRC, Beijing 100038, China

Land, 2022, vol. 11, issue 11, 1-14

Abstract: Agglomeration and dispersion forces fundamentally determine urban and regional development. While traditional views on agglomeration forces are primarily from a production perspective, the growing literature focuses on the consumption perspective and suggests that larger cities may generate better consumption amenities. This paper joins the discussion by examining whether and to what extent city size increases household expenditure on such non-tradable goods and services, as restaurants, entertainment, health and fitness, housekeeping services and clothes. We hypothesize that city size raises the marginal utility of these consumers by increasing the variety of their products or services, supporting certain sectors that have substantial scale economies, or expanding the number of their specialized retail stores, so that households in larger cities want to spend more on these items. The data we use are from the China Household Finance Survey that documents the income, expenditure and demographic information of more than 8000 households from 85 cities in 2011, 2013 and 2015. Our results indicate that city size significantly raises household expenditure on restaurants, entertainment and health and fitness. These sectors have either quite differentiated products or services, or significant fixed costs, so that they rely heavily on scale economies.

Keywords: city size; consumption amenities; household expenditure (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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