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Current research to explain the growth in rural housing size tends to consider independent household behavior, while social interactions among villagers are neglected. It turns out that rural households build housing not only to satisfy their dwelling needs but also to keep up with the other villagers’housing size.
- rural housing
- peer effect
1. Introduction
Increasingly, scholars and policy makers have attempted to understand the enthusiasm surrounding rural housing construction. Past research on rural housing construction has shown that residential improvement needs, membership for future return, and potential rental profits are all motivations for rural housing construction [1][2][3]. However, researchers have found that acquiring relative status and showing off success can also increase the demands of conspicuous goods such as housing [4]. In this way, housing construction behavior should not be considered an independent household decision, as it is also shaped by social interactions with villagers nearby.
In housing research, housing is customarily regarded as a tool to satisfy residential and investment needs, which are studied under the framework of individual demand and supply [5]. However, it is recently increasingly accepted that housing also plays a role as a status good [6], the demand of which is also influenced by social interactions with other people.
2. Peer Effects and Housing
There is increasing recognition that social interactions, in other words, interdependencies between individuals, play an important role in describing and explaining individual decisions and behaviors. Peer effects have been indicated as important determinants, described as a reference group’s influence on individual behavior. Reference groups such as neighborhoods, family, classmates, etc. may include a subgroup of individuals with single ties with others, or all members of the entire group might share the same social norms. The type (directional or reciprocated) and degree (strong or weak) of peer effect may differ among individuals and is determined by ability, effort, or other unobservable factors [7]. Peer effects exist in a wide range of individual behaviors such as education, labor markets, fertility, obesity, etc. [8][9].
However, despite the long history of research about the effect of social interactions on individual behavior, the literature regarding social interactions in housing research is still extremely limited. A taste for conformity that captures the idea of “keeping up with the Joneses” has been found in fields such as housing price, housing size, housing quality, and housing satisfaction, indicating that individuals view the reference group’s decisions on housing consumption and investment to keep up by making similar decisions.
The effect of social interactions highlights the tendency of individuals to view housing as a symbol of status and prestige. In this sense, housing is not just a good that satisfies dwelling needs, but also a “positional good” that satisfies the desire for relative status. Motivated by positional concerns, all members of a society are working more for wealth and conspicuous consumption to gain status. However, this tendency may result in a “positional treadmill” [10]. As everyone is heading toward the same direction, the relative position of individuals in a society is unchangeable, so no one is happier.
This entry is adapted from the peer-reviewed paper 10.3390/land11020172
References
- Wang, H.; Su, F.; Wang, L.; Tao, R. Rural housing consumption and social stratification in transitional China: Evidence from a national survey. Hous. Stud. 2012, 27, 667–684.
- Wang, J.; Zhang, Y. Analysis on the evolution of rural settlement pattern and its influencing factors in China from 1995 to 2015. Land 2021, 10, 1137–1152.
- Zhao, Y. Labor migration and earnings differences: The case of rural China. Econ. Dev. Cult. Change 1999, 47, 767–782.
- Yang, H.; Li, X. Cultivated land and food supply in China. Land Use Policy 2000, 17, 73–88.
- Arnott, R. Economic theory and housing. In Handbook of Regional and Urban Economics; Mills, E.S., Ed.; Elsevier Science Publishers: Amsterdam, Denmark, 1987; Volume 2, pp. 959–988.
- Leguizamon, S. Who cares about relative status? A quantile approach to consumption of relative house size. Appl. Econ. Lett. 2016, 23, 307–312.
- Winston, G.; Zimmerman, D. Peer effects in higher education. In College Choices: The Economics of Where to Go, When to Go, and How to Pay for It; Hoxby, C.M., Ed.; University of Chicago Press: Chicago, LL, USA; London, UK, 2004; pp. 395–424.
- Ioannides, Y.M. From Neighborhoods to Nations: The Economics of Social Interactions; Princeton University Press: Princeton, NJ, USA, 2012.
- Gaviria, A.; Raphael, S. School-based peer effects and juvenile behavior. Rev. Econ. Stat. 2001, 83, 257–268.
- Frank, R.H. The demand for unobservable and other nonpositional goods. Am. Econ. Rev. 1985, 75, 101–116.
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