Property Rights System of Land, Housing Price Structure and Wealth Inequality

The separation of rural land ownership, contracting rights, and management rights constitutes a crucial aspect of China's rural land property rights system. We construct a novel general equilibrium model that includes three markets for consumer goods, land ownership, and land use rights (abbreviated after merging contracting and operating rights). It shows that after collective land enters the market, housing price decreases and reflects more on the price of the use right. We further introduce shared ownership as a financial innovation into the framework above and find that some residents who originally planned to rent or buy houses purchased shared ownership houses. Model calibration shows that allowing collective land to trade can improve the welfare of low-income rural residents and mitigate wealth inequality (the wealth Gini coefficient dropped by 16%). The further introduction of shared ownership is a Pareto improvement. This study provides essential scientific insights into the economic impacts of collective land marketization and the implementation of the shared ownership housing systems, thereby facilitating a deeper understanding of the “separation of rights” reform in rural land in China.