The effect of housing wealth on labor force participation: evidence from China

Fu, Shihe and Liao, Yu and Zhang, Junfu (2015): The effect of housing wealth on labor force participation: evidence from China.

Abstract

This paper uses the 2011 China Household Finance Survey data to estimate the effect of change in housing value on homeowners’ labor force participation. Using the average housing capital gains of other homes in the same community as an instrument for the housing capital gains of a given household, we find that a 100 thousand yuan increase in housing value leads to a 1.37 percentage point decrease in female homeowners’ probability of participating in the labor force and a 1.49 percentage point increase in their probability of becoming housewives. We find little effect on men’s labor force participation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Housing wealth effect; housing price; labor supply; labor force participation
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J21 - Labor Force and Employment, Size, and Structure; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R20 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R30 - General

References

Adelino, Manuel, Antoinette Schoar, Felipe Severino, 2015, House prices, collateral, and self-employment, forthcoming in Journal of Financial Economics.

Berry, William D., Jacqueline H. R. DeMeritt, Justin Esarey, 2010, Testing for interaction in binary logit and probit models: is a product term essential? American Journal of Political Science 54, 248-266.

Berry, Steven, James Levinsohn, and Ariel Pakes, 1995, Automobile prices in market equilibrium, Econometrica 63, 841-890.

Bayer, Patrick, Fernando Ferreira, and Robert McMillan, 2007, A unified framework for measuring preferences for schools and neighborhoods, Journal of Political Economy 115, 588–638.

Brown, Jeffrey, Courtney Coile, Scott Weisbenner, 2010, The effect of inheritance receipt on retirement, Review of Economics and Statistics 92, 425-434.

Campbell, John, Joao Cocco, 2007, How do house prices affect consumption? evidence from micro data, Journal of Monetary Economics 54, 591-621.

Case, Karl, John Quigley, Robert Shiller, 2005, Comparing wealth effects: the stock market versus the housing market, Advances in Microeconomics 5, 1-32.

Case, Karl, John Quigley, Robert Shiller, 2013, Wealth effects revisited: 1975-2012, National Bureau of Economic Research Working Paper #18667.

Carroll, Christopher, Xia Zhou, 2010, Measuring wealth effects using US state data, Working Paper, online at http://www.frbsf.org/economic-research/files/Zhou.pdf.

Cooper, Daniel, María José Luengo-Prado, 2015, House price growth when children are teenagers: a path to higher earnings? Journal of Urban Economics 86, 54-72.

Dettling, Lisa, Melissa Kearney, 2014, House prices and birth rates: the impact of the real estate market on the decision to have a baby, Journal of Public Economics 110, 82-100.

Disney, Richard, John Gathergood, 2009, Housing wealth, liquidity constraints and self-employment, Labour Economics 16, 79-88.

Disney, Richard, John Gathergood, 2014, House prices, wealth effects and labour supply, Institute for Fiscal Studies Working Paper W14/25.

Fang, Hanming, Quanlin Gu, Wei Xiong, Li-An Zhou, 2015, Demystifying the Chinese housing boom, National Bureau of Economic Research Working Paper #21112.

Farnham, Martin, Purvi Sevak, 2007, Housing wealth and retirement timing, University of Michigan Retirement Research Centre Working Paper 2007-172.

Feng, Shuaizhang, Yingyao Hu, and Robert Moffitt, 2015, Unemployment and labor force participation in China: long run trends and short run dynamics, National Bureau of Economic Research Working Paper #21460. Fischer, Will, 2000, Labor supply effects of federal rental subsidies, Journal of Housing Economics 9, 150-174. Gan, Li, Zhichao Yin, Nan Jia, Shu Xu, Shuang Ma, Lu Zheng 2013, Data you need to know about China: research report of China Household Finance Survey 2012, Springer. He, Zhechun, 2015, Estimating the impact of housing prices on household labor supply in the UK, The University of York, Working Paper No.15/19.

Holtz-Eakin, Douglas, David Joulfaian, Harvey Rosen, 1993, The Carnegie conjecture: some empirical evidence, Quarterly Journal of Economics 108, 413-435.

Henley, Andrew, 2004, House price shocks, windfall gains and hours of work: British evidence, Oxford Bulletin of Economics and Statistics 66, 439-456.

Harding, John, Stuart Rosenthal, 2013, Homeowner-entrepreneurs, housing capital gains, and self-employment, Working Paper.

Hurst, Erik, Annamaria Lusardi, 2004, Liquidity constraints, household wealth, and entrepreneurship, Journal of political Economy 112, 319-347.

Imbens, Guido, Donald Rubin, Bruce Sacerdote, 2001, Estimating the effect of unearned income on labor earnings, savings, and consumption: evidence from a survey of lottery players, American Economic Review 91, 778-794.

Jacob, Brian, Jens Ludwig, 2012, The effects of housing assistance on labor supply: Evidence from a voucher lottery, American Economic Review 102, 272-304.

Joulfaian, David, Mark Wilhelm, 1994, Inheritance and labor supply, Journal of Human Resources 29, 1205-1234.

Johnson, William, 2014, House prices and female labor force participation, Journal of Urban Economics 82, 1-11.

Juhn, Chinhui, and Simon Potter, 2006, Changes in labor force participation in the United States, Journal of Economic Perspectives, 27-46.

Liu, Qian, 2012, Unemployment and labor force participation in urban China, China Economic Review 23, 18-33.

Li, Lixing, Xiaoyu Wu, 2014, Housing prices and entrepreneurship in China, Journal of Comparative Economics 42, 436–449.

Lovenheim, Michael, 2011, The effect of liquid housing wealth on college enrollment, Journal of Labor Economics 29, 741-771.

Lovenheim, Michael F., Kevin J. Mumford, 2013, Do family wealth shocks affect fertility choices? Evidence from the housing market. Review of Economics and Statistics 95, 464-475.

Milosch, Jennifer, 2014, House price shocks and labor supply choices, University of California Unpublished Working Paper.

Mood, Carina，2010, Logistic regression: why we cannot do what we think we can do, and what we can do about it, European Sociological Review 26, 67-82.

Moretti, Enrico, 2013, Real wage inequality, American Economic Journal: Applied Economics 5, 65-103.

Sheiner, Louise, 1995, Housing prices and the savings of renters, Journal of Urban Economics 38, 94-125.

Starkey, James L., Barbara Port, 1993, Housing cost and married women's labor force participation in 1980, The Social Science Journal 30, 23-45.

Wang, Shing-Yi, 2012, Credit constraints, job mobility, and entrepreneurship: Evidence from a property reform in China, Review of Economics and Statistics 94, 532-551.

Yoshikawa, Hiroshi, Fumio Ohtaka, 1989, An analysis of female labor supply, housing demand and the saving rate in Japan, European Economic Review 33, 997-1023.

Zhao, Lingxiao, and Gregory Burge, 2015, Housing wealth, property taxes and labor supply among the elderly, forthcoming in Journal of Labor Economics.