NDLI: Housing Investment in Urban China: Evidence from Chinese Household Survey

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Housing Investment in Urban China: Evidence from Chinese Household Survey

Content Provider	Semantic Scholar
Author	Cao, Yujin Chen, Jidong Zhang, Qinghua Cai, Hongbin Chan, Jimmy Yu-Wai Coulsen, Edward Fu, Shihe Henderson, Vernon Tang, Mingzhe Turner, Matthew A. Wu, Jianfeng Zheng, Siqi
Copyright Year	2016
Abstract	What explains the rapidly increasing housing invest ment demand in China? This paper conjectures that higher expected housing capi tal gains drive higher investment demand. Due to the financial frictions prevalent in China, such demand takes place not only through households’ owning multiple houses , but also through their owning a larger primary living residence if they are constra ined from buying multiple houses. We develop a simple framework to study how expected capital gains impact households' housing investment decisions when subje ct to financial constraints. Our empirical findings, based on 2010 and 2011 househol d survey data, are consistent with our theoretical predictions. Specifically, we find that (1) households are more likely to own multiple houses when expecting higher capital gains; (2) the primary housing demand of those households who are constrai ed from owning multiple houses increases with the expected capital gains; w hile (3) the primary residence demand of those who are not constrained does not in crease with the expected capital gains. Furthermore, we find that wealthier househol ds are more sensitive to changes in expected capital gains. Specifically, the margin al effect of capital gains on housing investment is higher for wealthier households. This links the booming housing market to widening income inequality which is a typical gr owth pain in a developing country like China. JEL Code: O12, O18, R1, R21
File Format	PDF HTM / HTML
Alternate Webpage(s)	http://www.jidongchen.org/uploads/4/0/1/7/40178799/housing.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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