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

Jie Chen, Haiyong Zhang and Qian Zhou
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Jie Chen: School of International and Public Affairs, Shanghai Jiao Tong University, Shanghai 200030, China
Haiyong Zhang: School of International and Public Affairs, Shanghai Jiao Tong University, Shanghai 200030, China
Qian Zhou: Economics School, Zhongnan University of Economics and Law, Wuhan 430073, China

Land, 2021, vol. 10, issue 6, 1-22

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.

Keywords: rule by law; law-based governance; housing price; sensitivity; heterogeneity; mediating mechanism (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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