| In any country, the real estate industry is a barometer of macro-economy. The real estate industry is huge, which involves dozens of downstream industries. So it can influence economic growth easily. For example, after the subprime crisis, more investment was put into infrastructure construction and real estate, which powerfully promote the recovery of China's economy. So, that a larger scale investment in real estate industry is the guarantee to the V type reverse of economy. However, expanding investment also resulted in soaring house price, which had been torturing Chinese scholars and politicians. Healthy development of the social economy should puts improving income and living standard of the overwhelming majority of citizens as the ultimate goal. But the soaring house price not only states the real estate wealth increasing rapidly, but also highlights the low consumption and income growth of the residents. Although these problems seem to be irrelevant to each other, through in-depth research, they can be related by the real estate wealth effect.Many studies abroad have proved the real estate wealth effects are significantly positive, which means growing house price can stimulate social consumption. However, in China, this theory seems to be invalid. After the housing commercialization reform in China from 1998, house price rose straightly. If China real estate wealth effect was positive, public consumption level should also grow rapidly. However, the fact is that the growth of Chinese residents' consumption is far behind the growth rate of house price and economy. The contradictory phenomenon shows that the real estate wealth effect in China is likely different from that in the developed countries, which makes related researches have great significance. In addition, provinces of China show significantly regional differences, which is a seldom phenomena in the developed countries. In the east, people has an more open consumption idea, just like the developed economy; but in the central and western regions, the economy is relatively backward, and people's idea is more conservative, just like underdeveloped countries. The huge development gap is more likely to result in different regional characteristics of real estate wealth effect. At the same time, with the spatial econometric continues to mature, spatial panel data analysis has been increasingly common, which can reflect space adjacency. Therefore, applied spatial econometric methods in the study of real estate wealth effect in China, some innovation perhaps can be got.Through empirical study, this paper attempts to check the existence of real estate wealth effect in China and study its transmission mechanism, spatial and regional difference, which can explain the low consumption and income disparity phenomenon. This paper consists of seven chapters:Chapter 1 is the introduction of this paper. It introduces the research background, theoretical and practical significance. And it summarizes the papers of domestic and foreign scholars in the field of real estate wealth, based on which the shortcomings are raised. Then the research framework of this paper is constructed.Chapter 2 introduces relevant theoretical basis and models. Firstly, it clarifies the definitions of wealth effect and real estate wealth effect, and discusses theoretical foundation for wealth effect. Secondly, it reviews various traditional consumption theories and consumption function. Thirdly, it analysis two transmission mechanisms of the real estate wealth effect and tries to give explanations from behavioral finance perspective. Fourthly, combined with the actual situation in China, a consumption function based on the life cycle theory is constructed. Finally, it introduces the development of spatial econometrics and several definitions that will appear in the next chapter.Chapter 3 is a descriptive analysis of China's real estate market and residents' consumption. Through representative indicators, it studies the bubble in real estate industry from 1999 to 2008 and the consumption trend of Chinese urban residents. Then, it tests the spatial autocorrelation of house prices and consumption expenditure in 31 provinces, which makes exploration for chapter 4.Chapter 4 is a comprehensive analysis of the wealth effect in China's real estate market. Firstly, it introduces the main models of spatial econometric. Secondly, it estimates consumption function with common panel data model, no fixed effects spatial auto-regression model and spatial error model. Finally, it estimates auto-regression model and spatial error model with time and space fixed effects. And it also makes a comparative analysis of the performance of real estate wealth effect resulted from different models.Chapter 5 is the regional characteristics of real estate wealth effect in China. Firstly, using common panel data model and spatial panel data model, it analysis the real estate wealth effect in the east, central and west part of China. Secondly, it explains empirical analysis results from different income level, social security coverage etc. perspectives. Finally, it shows that high house price extrudes too much consumption in the east is the main cause for negative wealth effect. And it also explains the reason for the un-significance of wealth effect in the central and west parts.Chapter 6 is the consequences and risk due to negative wealth effect. Firstly, soaring house price leads to wealth redistribution, which is called the third distribution of national income in this paper. Secondly, national wealth is centralized extremely for the reason of unusually high house price, which results in distorted consumption structure that luxury consumption grew rapidly, but ordinary consumption grew slowly. Thirdly, negative wealth effect leads to a locked state of institutional reform, which can be explained from interest relations and transmission mechanism produced by high house price. Finally, negative wealth effect hinders the urbanization process in China.Chapter 7 consists of countermeasures and suggestions to eliminate negative wealth effect. For this purpose, the key is to control the soaring house price, and some reforms should be put into effect. They are to reform the revenue distribution mechanism between central and local governments, to eliminate increasing revenue by land sales, to develop real estate market trade markets and low-rent houses vigorously. And to crackdown real estate speculation is also necessary, through imposing house property tax, stopping new loan to the speculators.
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