A Tale of Two Cities: The Announcement Effect of Northern Metropolis Plan

Abstract

Using the October 2021 announcement of Hong Kong's Northern Metropolis Plan as a quasi-natural experiment, we examine its impacts on households, firms, and demographics. Leveraging 100,576 housing transactions, 4.7 million consumption records, and district-level demographic data, difference-in-differences estimates show housing prices in the treated region rose by 3.9% within one year, alongside a 4.1% increase in consumption. Firm entry expanded, with inflows of higher-income, higher-educated households. We find a mild, lagged spillover to Shenzhen's housing market but no significant firm response. While the policy narrows cross-region inequality, it increases within-region inequality and raises affordability concerns for lower-SES households.