Equilibrating ripple effect, disturbing information cascade effect and regional disparity - A perspective from China's tiered housing markets

The current study investigates the role of the tier-one cities of China in affecting regional disparities within and across its five mega-city clusters, through the lens of housing market. For that purpose, an equilibrating ripple effect is differentiated from a disturbing information cascade effect. Evidence suggests that a modest slow-moving equilibrating force originated from Hong Kong has flowed across all tier-one and most tier-two cities in the mainland, indicating a narrowing of regional inequalities between Hong Kong and the mainland cities. On the other hand, a powerful disturbing force emanated from Beijing has affected all other cities, widening the inequality gap in between. The impulse response functions further suggest that this disturbing force has a permanent impact on regional disparity.