Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/61173
Title: Convergence and spillover of house prices in Chinese cities
Authors: Chow, WW
Fung, MK 
Cheng, ACS 
Keywords: China house prices
Convergence
Spatial dynamic panel model
Spillover
Issue Date: 2016
Publisher: Routledge, Taylor & Francis Group
Source: Applied economics, 2016, v. 48, no. 51, p. 4922-4941 How to cite?
Journal: Applied economics 
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.
URI: http://hdl.handle.net/10397/61173
ISSN: 0003-6846
EISSN: 1466-4283
DOI: 10.1080/00036846.2016.1167829
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