How housing price affects labor migration?

ZHANG Li1 HE Jing2 MA Runhong1

(1.Sun Yat-Sen University 519082)
(2.Fudan University 200433)

【Abstract】From 1998 to 2015, Chinese commercial residential buildings experienced skyrocketing housing prices, which increased by 2.3 times. The average annual housing prices of four metropolises, including Beijing, Shanghai, Guangzhou, and Shenzhen, have increased by more than 20% since 2010, resulting in a wide discussion of fleeing urban life. Urban growth results in the accumulation of human capital from the labor force. Nowadays, China emphasizes innovation, entrepreneurship, and talent introduction, aiming for highly skilled laborers to consolidate the internal driving force of urban development. However, laborers must inevitably consider housing when they choose a city, and the effects of housing prices should not be overlooked. Theoretically, high housing prices have both positive and negative effects on labor migration. High housing prices in one city mean better economic development, better job opportunities, greater probability of wealth accumulation, and better amenities. Thus, people often choose cities that have high housing prices. However, the rapid increase in housing prices significantly increases the living costs of migrant laborers. In this paper, we find a U-shaped trend in labor migration using China Labor-force Dynamics Survey ( CLDS) data from 2012 and 2014 and the housing prices of 250 prefecture-level cities using conditional logistic regression. The results are robust when controlling for the measurement error of housing price effect on individual migration choice; outflow place characteristics, such as distance to inflow places; and personal characteristics, such as individual motivation to migrate to outflow places. We focus on analyzing the effects of different types of labor on housing price. Heterogeneous labor forces with different educational levels, certificate ownership, and family backgrounds react differently to housing price. Highly skilled workers with advantages in these three factors are more sensitive to their settled housing prices due to their willingness to purchase, whereas low-skilled workers prefer to rent. Furthermore, we find that individuals who became residents in settled cities are relatively more sensitive to housing prices. In addition, the inverted U effect is more significant in coastal metropolises. This paper's major contribution can be broken down into three aspects. First, we develop a model that demonstrates the effect of housing price on labor migration. We treat housing price as not only the living cost but also the signal of migrant laborers' settling choices. Second, CLDS data track individuals' migration routes and include information on the cities to which they migrate. We create a novel database by matching CLDS and housing price data from 2000 to 2012 for 250 prefecture-level cities. We provide reliable empirical evidence of the effect of housing price on labor migration. Third, we illustrate the importance of heterogeneous labor forces and migrating city features. Our study provides policy implications and a new angle from which to research similar topics in the future. Based on our findings, housing price significantly influences labor migration, and housing price policy should be adjusted according to a city's housing price level. In metropolises that outweigh the breakpoint, the local government should increase the supply of residential land to attract and retain highly skilled laborers. Moreover, as high housing prices have larger inhibiting effects on highly skilled laborers than on low-skilled laborers, some policies aimed at driving away low-skilled laborers by limiting land supply to improve housing prices may have opposite effects. Specifically, metropolises should increase land and housing supplies to attract the immigration of more highly skilled laborers and to promote innovation, business starting, and industrial upgrading. In addition, the breakpoint of inland cities is much lower than that of eastern coastal cities. From this aspect, perhaps more alarmingly, the negative effect of increased housing prices on laborer migration to inland cities may influence the endogenous urban growth capacity.

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CN: 11-1081/F

Vol 52, No. 08, Pages 155-170

August 2017


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