Abstract
To address the imbalanced development in China, this study focuses on housing prices in China's large urban areas, referred to as “agglomerations” which is distinct from the label of “tier 1” versus “tier 2” (and three and four) that is used to categorize cities in China which have been the focus of previous research. It primarily uses a dummy variable approach to analyze whether, in China, housing prices in cities within a core urban agglomeration increase faster than those in a non-core urban agglomeration. This study also makes technical contributions in using altitude and other appropriate instrumental variables to address endogeneity issues, which is useful in studying Chinese cities. Our results show that housing prices are found to grow more rapidly in cities in the Pearl River Delta urban agglomeration, at a statistically significant level, than in other regions studied. Therefore, polarization in the core urban agglomeration is now much severer than we expect. Using housing prices as an indicator, this study reveals a sharpened trend of imbalanced development in Chinese cities. In addition to its empirical findings, this study also discusses some policies that policymakers can make on coordinating economic growth and stabilizing housing prices.
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