Convergence and spillover of house prices in Chinese cities

William W. Chow, Michael K. Fung and Arnold C. S. Cheng

Applied Economics, 2016, vol. 48, issue 51, 4922-4941

Abstract: The issue of house price convergence in 34 Chinese cities is investigated. We augmented the convergence model with contemporaneous spatial dependence in house prices and found that price convergence and positive spatial spillover are both present. We explicitly addressed the endogeneity problem by introducing a Bayesian instrumental variable setup, which was estimated with particle filtering techniques. From a growth poles perspective, the empirical evidence indicates that the spread effect in regional house prices outweighs the backwash effect. The identified positive spatial spillover has two effects on the growth of house prices in Chinese cities. First, the spillover elevates the trajectories of the steady-state growth paths of house prices. Second, the spillover narrows the gaps between the growth paths of house prices in neighbouring cities. Shocks to the socio-economic variables of a city generate their own effects on domestic house prices that dominate the effects arising from cross-city price feedbacks, thus mitigating the prospect of level convergence. Our findings also suggest a collaborating role between time and spatial dependence parameters. The identification of inter-city spillover, which is a conditioning factor for regional house price convergence, offers implications to policies that are most likely to be effective in reducing regional disparity.

Date: 2016
References: View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2016.1167829 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:48:y:2016:i:51:p:4922-4941

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2016.1167829

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().