House Prices Filter Effects On Human Capital:Theory And Practice

In the past 20 years, house prices especially in the first tier cities (such as Beijing, Shanghai and Shenzhen) have soared continuously, and impressed a lot. To one city, we can’t help but ask that how does the rise of house prices will impact the development of the city? Are house prices rise able to cultivate endogenous growth momentum in the city and what are the mechanism and path? Based on those questions, this paper will based on endogenous growth theory and empirical research methods, to explore house prices filter effects on human capital and try to answer those questions from the that human capital cross selection and flow angle.Specifically, this paper attempts to explain house prices from the perspective of the inner-city viability and the cascade flow of elements among cities, and conduct econometric test on the screening effect of house price on human capital. I hope this paper can provide policy references for the government to promote the talent gathering and economic growth. For that purpose, this paper reviewed and commented the relevant theory and literatures on the international and domestic house price driven factors, human capital and income, house prices and the trans-regional flow of human capital. And then, this paper innovatively constructed a city endogenous development theory model based on factors’ flowability. In the empirical part, this paper used the 2006-2013 data of 35 large and medium cities in China. After LSDV testing, this paper did regression analysis of the relationship among housing price, wage and human capital.The findings are as below:(1) From the perspective of incremental, the larger the scale, the higher the house price of the city, and the higher the level of human capital inflowed.(2) From the perspective of human capital endowment, the larger the scale, the higher the house price of the city. And the human capital with houses can benefit from the rise in house price (wealth effect), and lower the output of human capital (crowding out effect).(3) To sum up, considering the wealth effect and crowding out effect on human capital, the net effect on the inflow city’s economic growth is complex. The relationship between human capital and house price may be an inverted U-shaped curve.The main conclusions are:house prices has filter effects on human capital. The house price of a city is corresponds to a certain level of wage, the aggregation of highly educated attracted by high level of wage will improve the city’s human capital level, and therefore promotes the expansion of city scale. As response, the wage of the city will be higher, and will attract more highly educated. Meanwhile, with the expansion of city scale, the house price in that city rise gradually, and can crowd out lower educated workers with low income. And the high level of wage keeps attracting highly educated. But at some price level because of the wealth effect, the potential output level of the endowment human capital will be crowded out, too. And then the endogenous growth capacity of city will be inhibited. Therefore, through filter effect on human capital, house prices has dynamic effects on urban economic development, and that effects may have an inverted U-shaped characteristic.This study also has deficiencies. At the end of this paper I discussed these deficiencies in detail, and put forward the future research targets.