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China’s Housing Bubble, Infrastructure Investment, and Economic Growth

Shenzhe Jiang (), Jianjun Miao () and Yuzhe Zhang ()
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Shenzhe Jiang: Peking University
Jianjun Miao: Boston University
Yuzhe Zhang: Texas A&M University

No dp-332, Boston University - Department of Economics - The Institute for Economic Development Working Papers Series from Boston University - Department of Economics

Abstract: China’s housing prices have been growing rapidly over the past few decades, despite low growth in rents. We study the impact of housing bubbles on China’s economy, based on the understanding that local governments use land-sale revenue to fuel infrastructure investment. We calibrate our model to the Chinese data over the period 2003-2013 and find that our calibrated model can match the declining capital return and GDP growth, the average housing price growth, and the rising infrastructure to GDP ratio in the data. We conduct two counterfactual experiments to estimate the impact of a bubble collapse and a property tax.

Keywords: Housing Bubble; Infrastructure; Economic Growth; Chinese Economy; Property Tax (search for similar items in EconPapers)
JEL-codes: O11 O16 O18 P24 R21 R31 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2019-12
New Economics Papers: this item is included in nep-cna, nep-knm, nep-tra and nep-ure
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http://people.bu.edu/miaoj/HousingBubble07.pdf

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