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Evaluating Housing Supply Elasticity In Inter-City Spatial Equilibrium: Evidence From Chinese Urban Growth

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Executive Summary

The authors examine the influences of urban redevelopment costs and land-use allocation efficiency and equity on the elasticity of housing development density with respect to urban demand shocks in the context of China's urban growth from 1998 to 2004. They do so in an inter-city spatial equilibrium framework, where demand shocks are capitalized in urban land rent growth, which influences urban population growth through housing supply elasticity. Importantly, this approach distinguishes the supply elasticity revealed by the population growth effect of land rent shocks from the price effect of urban population shocks, which reveals the effect of agglomeration economies, a distinction not widely recognized in the extant housing supply studies.

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