Local Public Expenditure, Public Service Accessibility, and Housing Price in Shanghai, China

Abstract

The level of public service accessibility differs by residential locations. Existing literature has documented the effects of public service accessibility on housing prices. However, few studies have examined how public service provision affects housing prices under the Chinese centralized governance system. Using data from different geographic scales, this study uses a multilevel research design to examine how public service provision is associated with housing prices in Shanghai. Results show that though the total expenditure at the urban district level is not related to housing prices, government redistributive expenditure is positively associated with housing price and the developmental expenditure is on the opposite. The expenditure effects are further mediated by the accessibility to public facilities at the community level. The findings suggest that, as public service accessibility has been capitalized into housing prices, the decentralized fiscal system with relatively centralized governance structure may have reinforced urban polarization in Shanghai.