What Drove Housing Wealth Inequality in China?
Published date | 01 January 2021 |
Author | Chen Wang,Guanghua Wan,Yu Wu |
Date | 01 January 2021 |
DOI | http://doi.org/10.1111/cwe.12361 |
©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences
China & World Economy / 32–60, Vol. 29, No. 1, 2021
32
What Drove Housing Wealth Inequality in China?
Guanghua Wan, Chen Wang, Yu Wu*
Abstract
Although China is experiencing a deterioration in wealth distribution where housing
is playing a dominant role, this issue has received scant research attention despite its
importance. Combining four rounds of the China Household Finance Survey (CHFS)
data, this paper measures and discusses wealth inequality in China, with a special
emphasis on the contribution of housing. Our analysis reveals that housing is the largest
contributor to wealth inequality, responsible for around 70 percent of total wealth
inequality, and its contribution has been increasing over time. Our research efforts have
focused on the housing wealth disparity, exploring its composition from alternative
perspectives. The results show that housing wealth inequality has also been rising
over time and an absolute majority of housing wealth inequality is due to within-group
gaps. Finally, we employ Wan’s (2004) regression-based decomposition methodology to
quantify the contributions of different determinants to housing wealth disparity in China,
and to demonstrate serious biases in the conventional approach that is often used to
analyze housing wealth inequality.
Key words: housing wealth inequality, regression-based inequality decomposition,
wealth distribution
JEL codes: D31, D63
I. Introduction
A major issue accompanying China’s rapid growth and transformation is worsening
wealth distribution.1 However, the literature on wealth distribution in China has largely
focused on income or consumption (see Wang et al., 2014 for more references) with
*Guanghua Wan, Professor, Institute of World Economy, Fudan University, China. Email: guanghuawan@
fudan.edu.cn; Chen Wang (corresponding author), Associate Professor, School of Urban and Regional Science,
Institute for Yangtze River Delta and Yangtze River Economic Belt Development, Shanghai University of
Finance and Economics, China. Email: wang.chen@mail.shufe.edu.cn; Yu Wu, Associate Professor, Survey
and Research Center for China Household Finance, Southwestern University of Finance and Economics,
China. Email: wuyu@chfs.cn. Financial support from the Natural Science Foundation of China (Nos.
71833003 and 72073091) and the Higher Education Discipline Innovation Project (111 Project) (No. B16040)
is acknowledged.
1The words “inequality,” “disparity,” “gap,” and “distribution” are used interchangeably in this paper.
©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences
Housing Wealth Inequality in China 33
relatively little attention given to assets or wealth. More important, disparities in income
are found to have declined in the past decade (Wan et al., 2018) although, in contrast,
the wealth disparity is worsening. According to Li et al. (2000, 2005, 2008), and Xie
and Jin (2015), the estimated Gini coefficient of wealth for China was 0.4 in 1995;
it rose quickly to 0.55 in 2002, 0.68 in 2006, and was 0.73 in 2012. Finally, unlike
income and consumption, which are fl ow variables, wealth and housing assets as stock
variables can accumulate over time and across generations. Consequently, their unequal
distribution often perpetuates itself, leading to serious socioeconomic consequences
such as stratifi cation, segregation, and polarization. It is therefore imperative to analyze
the issues of wealth and housing wealth distribution in China – issues that are expected
to attract more research, and public and policy attention.
There have been some attempts to study housing inequality in China (e.g. Wang,
1995; Yi and Huang, 2014; Zhang et al., 2016) and other economies (e.g. Plaut, 1987;
Szelenyi and Kostello, 1996). Nevertheless, as recently argued by Aladangady et al.
(2017), housing wealth inequality has received less research attention than income,
consumption, or wealth inequality (Logan et al., 1999; Huang and Jiang, 2009). In
particular, no previous research has used Wan’s (2004) regression-based decomposition
technique to identify and quantify the determinants of housing wealth inequality.
This is unfortunate because housing plays a prominent role in wealth accumulation
and distribution in China and elsewhere (Xie and Jin, 2015; Aladangady et al., 2017).
Inequality of housing is also more important than inequality of income, which is only a
means to other ends.
Against this background, the present paper focuses on housing wealth inequality in
China.2 More specifi cally, based on four rounds of the China Household Finance Survey
(CHFS) data, covering the period 2011–2017, this paper makes the following empirical
contributions:
• It analyzes China’s wealth inequality and examines the contributing factors (e.g.
the rural–urban gap, the regional gap, and the inter-city gap). This paper supplements
and helps enrich the limited literature on wealth distribution in China.
• It quantifi es the role of housing wealth in developing China’s wealth inequality
over time (e.g. how much of China’s wealth disparity is attributable to unequal housing
wealth in urban / rural / whole China). Although studies on wealth or housing inequality
in China exist, most of them focus on inequalities in housing space, housing quality, and
so on, not inequality of housing wealth or its contribution to wealth inequality.
• It quantifies the contributions of various determinants of housing wealth to
2Unless explicitly specifi ed, our analyses are conducted at the individual or per capita level.
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