Does urban housing demolition increase wealth inequality in China?

Urban housing demolition has been a core Chinese policy to deal with poor quality and substantial residential units in cities in China. The policy operated to compensate individuals who were displaced when demolition projects were undertaken. Now the compensation for demolition in the shanty towns may be the largest transfer payment to households in the history of China. However, the large amount of compensation for demolition has also aroused social concerns that demolition will exacerbate wealth inequality. This study uses data from the China Household Finance Survey (CHFS) data in 2013 and 2019 to analyze the impact of urban housing demolition on wealth inequality within cities. The results show that for cities with relatively lower levels of initial wealth inequality, the relatively wealthier households who experienced demolition had a rapid increase in their wealth. Thus, demolition increased the intra-city wealth inequality. In contrast, for cities with relatively higher levels of initial wealth inequality, demolition reduced the intra-city wealth inequality by removing low value housing units. Significantly, with the majority of tier 3 and tier 4 cities exhibiting greater initial wealth inequality compared to their tier 1 and tier 2 counterparts, the demolition policy has, in essence, curbed wealth disparities in these smaller urban areas. The paper also suggests how transfer payment policies can be used to realize the goal of common prosperity. • Individual housing demolition data provides greater clarity on effects of demolition on wealth inequality. • The effects of demolition on intra city inequality vary by locations of the demolished houses within city. • Demolition reduces intra city variation in wealth in most cities. [ABSTRACT FROM AUTHOR]