How Housing Price Fluctuation Affects Resource Allocation: Evidence from China

A large number of recent proofs indicate the irrationality of optimal resource allocation assumption in traditional economic growth theory, wherein resource misallocation (misallocation of capital and labor among heterogeneous enterprises) is regarded as the important reason for the difference in total factor productivity (TFP). In this article, we study resource allocation from the perspective of housing price, and measure the resource allocation efficiency of industrial enterprises in China based on industrial enterprises database covering the period of 1999-2007. We find that to some extent rising housing price has ameliorated resource allocation efficiency in China recently. We further find that rising housing price ameliorates resource allocation mainly in Central and Western areas and in labor-intensive industries.