Do rising housing prices restrict urban innovation vitality? Evidence from 288 cities in China

Abstract

To continually improve and maintain the innovative vitality of a city is critical in the context of increasingly fierce global competition. Based on panel data of 288 cities in China from 2001 to 2016, a simultaneous equation model is used to empirically test the interaction between housing prices and urban innovation vitality. The results show an interactive relationship between housing prices and urban innovation, instead of housing prices exclusively impacting urban innovation power. In turn, with the improvement of urban innovation power, housing prices rise accordingly. The impact of housing prices on urban innovation shows an inverted U-shaped feature; that is, with the rise of housing prices, the vitality of urban innovation rises initially and then decreases. The inflection points of house prices in four first-tier cities, 31 non-first-tier large and medium-sized cities, and 253 prefecture-level cities are RMB 31532, 9307, and 5782 per square meter, respectively. When housing prices exceed inflection points, the continual rise of housing prices will gradually weaken the innovative vitality of the city. Based on controlling housing prices, this paper provides valuable insight into maintaining a city’s innovation.