Research On The Capitalization Effect Of Local Public Goods In House Price And Its Spatial Heterogeneity

In the wake of the increasing freedom of location choice within China’scities, as well as households’ rising demand for public goods such as educationand environmental amenities, housing market has played more important role inpublic goods allocation within cities. Studies have found that public goods aresignificantly capitalized into housing price around them, and this contributes tothe spatial variation in housing price. Further theoretical studies show that thecapitalization of some local public goods has spatial heterogeneity character,and is higher in areas where residents’ demand intensity is higher and the supplyof houses is limited.Based on transaction data of newly built commercial housing projects inBeijing and Chengdu, this thesis first examines the capitalization effect of localpublic goods and its heterogeneity employing SAR model and GWR model.Then, we perform an analysis of the economic mechanism of demand intensityand housing supply constraint on spatial heterogeneity in local public goodscapitalization. In particular, when testing the housing supply effect, theinstrumental variable method will be used to overcome internality issues.Empirical results show that capitalization effect of key primary schoolsand green parks does exist in Beijing and Chengdu. Employing GWR model toestimate the heterogeneity in capitalization of key primary schools and parks,we found that there is significant spatial heterogeneity in both cities. In addition,the influence of demand intensity and housing supply on spatial heterogeneity isin line with theoretical expectations. With one unit of standard deviationincrease in demand intensity index, capitalization of key primary schools inBeijing and Chengdu increases by0.13%and0.1%, and capitalization of greenparks increases by0.4%and0.41%respectively. Limitations in housing supplyalso result in higher capitalization, with one unit of standard deviation change inhousing supply, capitalization of primary schools increases by1.75%and1.47%,and capitalization of green parks increase by3.91%and3.42%respectively inBeijing and Chengdu. Comparing the empirical results from Beijing andChengdu, we found that the effect of housing supply constraint and demand intensity on capitalization of local public goods is positive correlated with thematching of housing supply and demand intensity within cities.Based on empirical findings, this thesis recommends that we should payattention to the joint development of housing market and local public goodssupply in urban space planning. We need to guarantee the supply of local publicgoods in areas where population grows fast and demand intensity is high, andavoid over scarcity of housing supply in areas with local public goodsadvantages. Thus, excessive capitalization of local public goods in housingprice will be avoided, and residents’ consumption of public goods and welfarewill be improved. Finally, this will contribute to efficiently relieve high housingprices in areas where local public goods advantages are obvious, and improveurban spatial efficiency and equity, as well as the operating quality of housingmarket.