The heterogeneity of market supply effects of public housing provision: Empirical evidence from China

This paper examines why and how public housing provision may affect the supply of market-based housing in urban China. We illustrate how both the demand mechanism and the cost mechanism may lead to the crowding-out effect of public housing provision on market housing provision in post-reform urban China. Based on panels of both provincial-level and city-level data for the period of 1999-2010, our empirical results shows that: (1) the supply of public housing has crowding-out effect on the supply of market housing in China but its degree is generally moderate; (2) the crowding-out effect varies substantially under different scenarios; (3) the crowding effect changes over time but its estimation accuracy is gradually improving in the sample period. The findings in this paper have useful implications to the design of public housing programs in general. (C) 2016 Elsevier Inc. All rights reserved.