Wages, house prices and industry composition: an empirical analysis of cities in China

Abstract

Wages and house prices are two of the hottest public issues in China today. Whether and how the change in industry composition affects them? These issues have received widespread public attention. This study is dedicated to analysing the effects of industrial composition, which is measured by an index calculated using 19 2-digit industries, on wages and house prices using a modified hedonic price model and prefecture-level city data from China between 2005 and 2013. The main findings indicate that (1) an increase in industry composition index will drive up wages and house prices. The increment of wages surpasses that of house prices, showing that the house-purchasing burden decreases as the index increases; and (2) the effects of industry composition on wages and house prices differ between high-, middle- and low-income cities. The change in industry composition may increase the wage and house price gaps between cities of different income levels.

Keywords:

• Industry composition
• wage
• house price
• hedonic price analysis
• China

Acknowledgements

We thank anonymous reviewers very much for their comments and suggestions. All faults belong to us.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 There are three 1-digit industries and 19 2-digit industries in China (Table 1). Industry composition (or industrial structure) is a concept that depicts the proportions of these industries in an economy.

2 China Statistical Yearbook for Regional Economy has stopped updating since 2014, so related data on house prices in prefectural-level cities are attainable up until 2013.

3 CNY is the abbreviation for Chinese Yuan.

Additional information

Funding

This research was funded by the National Social Science Foundation of China (Project No. 13AJY006), Chongqing Technology and Business University (Project Title: Theoretical, Policy and Efficiency Analyses on Narrowing Urban-Rural Income Gap), Research Center for Economy of Upper Reaches of the Yangtse River, Chongqing Technology and Business University (Project No. CJSYTD201707), and the Natural Science Foundation of China (NSFC Projects No. 71833003 and 71703088).

Notes on contributors

Jing Wang

Dr. Jing Wang, granted PhD degree in Economics by Oklahoma State University in the U.S., currently works an assistant professor in School of Economics from Chongqing Technology and Business University.

Lifen Zhu

Dr. Lifen Zhu, professor in Research Center for Economy of Upper Reaches of the Yangtze River, Chongqing Technology and Business University, has published more than 40 academic papers in top journals in the field of economics in China such as Economic Research Journal and China Agricultural Economy, etc. Professor Zhu has hosted and participated more than 40 national as well as provincial projects. She has won six provincial level awards due to her outstanding achievements in social science research.

Jing Li

Dr. Jing Li, professor and dean of School of Economics in Chongqing Technology and Business University, has published more than 70 academic papers and reports in top journals in the field of economics and management in China such as Economic Research Journal and Management World, etc. Professor Li is awarded the title of ‘State Council Special Allowance Expert’ and is a candidate of the Ten-thousand Talents Program, a national special support program for high-level personnel recruitment in China.