Graduate Research and Discovery Symposium (GRADS)


Income Inequality, Soaring-up Housing Price and Housing Overdevelopment

Document Type


Publication Date

Spring 2015


There are three existing primary explanations for housing bubbles: rational expectations, irrational or psychological factors and stimulating housing policies. Very few studies have connected housing bubbles with income inequality. This dissertation tries to uncover the inherent linkage from income inequality to housing bubble, further showing that the fair distribution of income is not only the national welfare goal, but also the imperative condition that guarantees the healthy housing market and the sustainable economic growth of a country. Although the soaring-up of housing prices in China over the last fourteen years has been attracting a significant amount of attention, very few studies focused on its the relationship to the going-down of the real price of consumption goods. In addition, few have explored why demand in certain housing market has been oddly coexisting with an insufficient demand in China's consumption market since 2000. These two concerns are additional pieces to solving the housing puzzle. This dissertation builds a model that integrates intertemporal choice and, transaction costs with portfolio selection to help explain this puzzle. We then tests the hypotheses empirically based on the data from several research institutes in China as well as a survey and additional simulation analysis.

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