China's urban housing reform: Implications from wage determination, inequality and welfare improvement

Using two data sets collected by Chinese Housing project in 1995 and 1988, my dissertation studies the urban housing reform in China.For public sector employees, the allocation of public housing benefit is not influenced as much as wage income by their personal qualifications, such as sex, education level, and years of employment. Private sector employees have an income premium compared to public employees with similar qualifications. This is also true when housing benefit of public sector employees is taken into account. The income premium can be responsible for the transfer of employees from public sector to private sector.Public sector employees in China rely on their employers to provide low rent public housing before housing reform and even after several years of reform experiments have taken in China's urban area. Public housing benefit is a kind of subsidy and constitutes part of the total real income for public sector employees. However, as shown in this study, this is not optimal for public housing residents. If they are given the subsidy in cash and choose their own housing units instead, there will be utility gains or money savings with current utility level. My study uses the distribution-based method and parametric-prediction-based method to estimate the money saving of public housing residents compared with under the free market situation if they could get total income in cash.Based on an estimation of public housing benefit for the two income survey data sets, my study also finds that higher income families also have larger housing benefit in absolute value. However, the share of the benefit to total income becomes smaller as income level goes up. After several years of housing reform, urban Chinese families have larger living space on average and the degree of inequality has been lower.