Housing Market and Entrepreneurship: Micro Evidence from China

Han, Bing and Han, Lu and Zhou, Zhengyi (2020): Housing Market and Entrepreneurship: Micro Evidence from China.

Abstract

Using a unique survey data of Chinese households, we study the impact of house price growth and house price risk on entrepreneurship. House price risk, measured as the sensitivity of house price growth to local GDP growth, negatively impacts the entrepreneurship of homeowners relative to renters. This finding is concentrated only among sophisticated households and is consistent with the portfolio effect when housing and occupational choices are integral parts of the household portfolio. Moreover, a high past house price growth reduces the entrepreneurship of homeowners relative to renters. This holds for both sophisticated and unsophisticated households. We propose a new economic channel based on extrapolative belief and provide further supportive evidence.

• Item Type: MPRA Paper
• Language: English
• Keywords: Entrepreneurship; Housing market; Extrapolative belief
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D10 - General; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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