Peer Effects in Housing Size in Rural China

In recent decades, rural China has witnessed a housing construction boom. In order to control the rapid growth of rural housing, both central and local governments have established quantitative restrictions on the floor numbers and total housing area; however, these have been relatively ineffective. Current research to explain this rapid growth in rural housing tends to consider independent household behavior, while social interactions among villagers are neglected. Therefore, the aim of this article is to examine the existence of peer effects in the housing size of villagers and whether they differ among different regions to better understand the influence of social interactions on individual housing behaviors, especially in the context of rural China. A spatial autoregressive model with autoregressive disturbances (SARAR) was used to analyze data from the 2014 China Family Panel Studies (CFPS). The results confirm that villagers’ peer effects do exist, indicating that rural households build housing not only to satisfy their dwelling needs but also to keep up with the other villagers’ housing size. Moreover, there are regional disparities in terms of peer effects in rural housing size. Among the three regional parts, the undeveloped region in the western parts showed the largest peer effects. Therefore, local governments, especially from the underdeveloped region, should pay attention to the villagers’ inner motivations behind housing behavior.