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Sub-National PPPs Based on House and Real Income Disparity across China: a Distinctive Spatial Deflator

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Abstract

Comparisons of real income within a country generally imply a deflation for relative price differences across regions. Housing services are the main source of spatial price difference because of the fixity of land supply. This paper argues that housing prices can synthetically reflect the general price level and proposes to estimate the subnational purchasing power parities (PPPs) based on the housing market as a distinctive spatial deflator to measure real income disparity. With a sample of urban and rural regions ranging from 1999 to 2015, house price relatives are estimated with the country-product-dummy (CPD) method; then, the subnational PPPs are calculated with the classic Gini-Eltetö-Köves-Szulc (GEKS) method. The results show that the subnational PPPs in the east regions are always high, while those in the middle and west regions are usually low for both urban and rural areas. The values of subnational PPPs for different regions change over time, while the trends are inconsistent between the east regions and the middle and west regions. Taking the subnational PPPs as a new distinctive spatial deflator, provincial income disparity exhibits an obvious descending trend. Notably, income disparity decreased significantly after deflating, for both urban and rural regions.

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Notes

  1. Due to the different caliber of statistics, the HPIR of China may be not entirely comparable with that of Europe and the U.S.

  2. A large decrease of approximately 10% occurred, resulting from the change in the statistical investigation program. From 2013, the National Bureau of Statistics (NBS) carried out an urban and rural integration of household income and expenditure survey, and the survey scope, survey method and index caliber of the separate urban and rural household surveys before 2013 are different.

  3. In rural regions, the household income per capita is the household pure income per capita before 2013, while this indicator is the household disposable income per capita because of the institutional change of the statistical investigation system in China.

  4. Notably, the measures of inequality here are calculated with the household income per capita of each region and represent only the inter-region inequality, ignoring within region inequality. And therefore, if within region inequality is included, the overall inequality (i.e., across and within regions combined) will be rather higher.

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Funding

This study is supported by Project of National Social Science Fund of China (19ATJ002)

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  1. School of Statistics, Beijing Normal University, No.19 Xinjiekouwai St., Beijing, 100875, People’s Republic of China

    Menggen Chen

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Chen, M. Sub-National PPPs Based on House and Real Income Disparity across China: a Distinctive Spatial Deflator. J Real Estate Finan Econ 62, 187–219 (2021). https://doi.org/10.1007/s11146-020-09746-9

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  • DOI: https://doi.org/10.1007/s11146-020-09746-9

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