Public Expenditure, Housing Value and Wealth Redistribution: Evidence from Chinese Cities

Abstract China’s household wealth is growing rapidly and has become significant worldwide. While the government played an important role in economic growth and wealth accumulation, few research has explained why and how government expenditure redistributes household wealth in Chinese cities. This study uses China Family Panel Studies (CFPS) household survey (2010–2018) and prefecture-level data to estimate the impact of government expenditure on household wealth, especially the value of housing asset. We find that the capitalization of government expenditure contributes an important part to housing value appreciation, which accounts for more than 50% of household wealth. Furthermore, the impact mechanism of government expenditure on households’ wealth has a substantial redistributive effect. Government expenditures greatly advance the net worth of households who own their houses, especially for households that own two or more houses, but contribute much less to those comprising rental tenants. JEL codes: D31, P25, H54, H41