Does Higher Housing Price Contribute To More Government Fiscal Revenues?

In recent years,housing price has risen rapidly in china.Real estate industry develops in a high speed and plays an important role in national economy.Local government has a passion for developing real estate industry and regard it as the pillar industry,whom think that rising housing price will help increase the local fiscal revenue.However,recent literature researches and empirical observations show that housing price also has apparently negative effect.So then,does higher housing price contribute to more government fiscal revenues?To answer this problem,we firstly refer to recent literatures and theoretically discuss the impact of rising housing price on government fiscal revenue,then we propose five basic hypothesis:First,regarding central and local government as a whole,housing price has a positive effect on the total fiscal revenue,but over time,this effect gradually declines until it disappear.Second,housing price also has a positive effect on tax revenues of manufacturing and other service industry in a short period,but as time goes on,this effect gradually declines until it disappear.Third,housing price has a positive effect on the sum of tax revenue of real estate industry and land transfer revenues,but over time,this effect gradually declines,and it still be positive in a long period.Forth,considering the tax-sharing system,housing price has a positive effect on local government fiscal revenue,but over time,this effect gradually declines,and it still be positive in a long period.Fifth,The impact of housing prices on government fiscal revenues has regional heterogeneity,the negative effects of housing prices may be more obvious in high real estate development areas.Secondly,this paper uses Chinese provincial panel data from 1998 to 2014 to test these hypotheses empirically.Results show that all hypotheses are proved.In particular,this paper has two important findings:First,In a long term,the rising housing price will not affect the total government fiscal revenues,but will increase the local government fiscal revenues.This finding fundamentally answers why central government vigorously regulate real estate industry,while local government is not willing to conducting those housing price control policy issued by central government.Second,there are regional heterogeneity in housing price.In a long term,in high real estate development regions,rising housing price doesn’t increase the local fiscal revenue,even decreases the total government fiscal revenue;In low real estate development regions,rising housing price doesn’t affect both the total and the local government fiscal revenues.These results suggest that the central government should adopt a regional housing price regulation policy,especially strengthening the regulation in high real estate development regions.