The Effect Of Housing Prices On The Industrial Agglomeration In China

Based on the panel data of 268 prefecture-level cities in China during 2001-2007,this paper examines the impact of housing price on the agglomeration of manufacturing industries in China.Using instrumental variable method to alleviate the problem of endogeneity,after controlling for a series of city characteristic variables,the basic IV regression results show that: The housing price has a significant negative impact on the manufacturing agglomeration.And this impact is mainly reflected in the eastern region which is restricted to more strict land supply after 2003.This shows that the change of land supply policy is the deep reason behind this.Furthermore,We divide the sample into high value-added manufacturing and low value-added manufacturing,we see that: the conclusions about the low value-added manufacturing industry are consistent with the basic regression results.Besides,housing price has significantly hindered the agglomeration of high value-added manufacturing especially for the eastern region.But for the central and western region,housing prices has contributed to the agglomeration of high value-added manufacturing.In order to understand the mechanism,we further analyze the impact of manufacturing labor productivity.The results show that compared with the eastern region,the deterioration of labor productivity in the Midwest is even more serious,indicating that the government policy which is aiming to promote the development of the Midwest,has not formed the agglomeration in the Midwest,but worsened it's productivity.