Demand for Urban Quality of Living in China: Evolution in Compensating Land-Rent and Wage-Rate Differentials

Abstract

The rapid pace of urbanization and income growth in China in the past decade, spurred in part by the liberalization of the urban housing and labor markets, resulted in considerable growth in urban land rents and wage rates. The objective of this study is to examine the influence of urban quality of living, comprising social and environmental amenities, on the evolution of cross-city land-rent and wage-rate differentials in China. We employ the household data from the 1998 and 2004 Urban Household Survey (UHS) to compute the intercity land-rent and wage-rate differentials, inferring the rent growth in individual cities from a household housing consumption demand equation as home values were not reported in the earlier UHS. Our findings show a strong increase in urban residents' willingness to pay for local amenity qualities between 1998 and 2004.