IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v69y2021ics1043951x21000742.html
   My bibliography  Save this article

Housing wealth changes and entrepreneurship: Evidence from urban China

Author

Listed:
  • Liu, Shimeng
  • Zhang, Sisi

Abstract

This paper studies the impact of household-level housing wealth changes on entrepreneurship in urban China. Exploiting the 2011–2015 China Household Finance Survey, we control for lagged proxies for wealth, city-by-year fixed effects, and other household attributes and directly estimate the magnitude of homeowner's response to housing capital gains net of home maintenance and upgrading expenditures. We also instrument for housing wealth changes with structural breaks in city housing price trend. We find that a 10,000 RMB increase in housing wealth increases the propensity of a household becoming a business owner by about 0.7 percentage points in IV estimation. In addition, we provide new evidence for underlying channels that housing capital gains alleviate household credit constraints, reduce risk aversion and increase awareness of financial information.

Suggested Citation

  • Liu, Shimeng & Zhang, Sisi, 2021. "Housing wealth changes and entrepreneurship: Evidence from urban China," China Economic Review, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:chieco:v:69:y:2021:i:c:s1043951x21000742
    DOI: 10.1016/j.chieco.2021.101656
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X21000742
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2021.101656?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Li, Han & Li, Jiangyi & Lu, Yi & Xie, Huihua, 2020. "Housing wealth and labor supply: Evidence from a regression discontinuity design," Journal of Public Economics, Elsevier, vol. 183(C).
    2. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
    3. Jensen, Thais Laerkholm & Leth-Petersen, Søren & Nanda, Ramana, 2022. "Financing constraints, home equity and selection into entrepreneurship," Journal of Financial Economics, Elsevier, vol. 145(2), pages 318-337.
    4. Veronica Rappoport & Enrichetta Ravina & Daniel Paravisini, 2010. "Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios," 2010 Meeting Papers 664, Society for Economic Dynamics.
    5. Li, Lixing & Wu, Xiaoyu, 2014. "Housing price and entrepreneurship in China," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 436-449.
    6. Thomas Chaney & David Sraer & David Thesmar, 2012. "The Collateral Channel: How Real Estate Shocks Affect Corporate Investment," American Economic Review, American Economic Association, vol. 102(6), pages 2381-2409, October.
    7. Erik Hurst & Benjamin Wild Pugsley, 2011. "What Do Small Businesses Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 73-142.
    8. Simeon Djankov & Yingyi Qian & Gérard Roland & Ekaterina Zhuravskaya, 2006. "Who Are China's Entrepreneurs?," American Economic Review, American Economic Association, vol. 96(2), pages 348-352, May.
    9. Bracke, Philippe & Hilber, Christian A.L. & Silva, Olmo, 2018. "Mortgage debt and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 103(C), pages 52-66.
    10. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1253-1296.
    11. Raj Chetty & László Sándor & Adam Szeidl, 2017. "The Effect of Housing on Portfolio Choice," Journal of Finance, American Finance Association, vol. 72(3), pages 1171-1212, June.
    12. Fu, Shihe & Liao, Yu & Zhang, Junfu, 2016. "The effect of housing wealth on labor force participation: Evidence from China," Journal of Housing Economics, Elsevier, vol. 33(C), pages 59-69.
    13. Martin C. Schmalz & David A. Sraer & David Thesmar, 2017. "Housing Collateral and Entrepreneurship," Journal of Finance, American Finance Association, vol. 72(1), pages 99-132, February.
    14. Richard Disney & John Gathergood, 2018. "House Prices, Wealth Effects and Labour Supply," Economica, London School of Economics and Political Science, vol. 85(339), pages 449-478, July.
    15. Wei, Shang-Jin & Zhang, Xiaobo & Liu, Yin, 2017. "Home ownership as status competition: Some theory and evidence," Journal of Development Economics, Elsevier, vol. 127(C), pages 169-186.
    16. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
    17. Xiang, Junyi & Liu, Chenhao & Li, Yiming, 2021. "The impact of household real estate and self-employment: Evidence from China," Economic Modelling, Elsevier, vol. 94(C), pages 873-884.
    18. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    19. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    20. Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2015. "House prices, collateral, and self-employment," Journal of Financial Economics, Elsevier, vol. 117(2), pages 288-306.
    21. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    22. Davidoff, Thomas, 2016. "Supply Constraints Are Not Valid Instrumental Variables for Home Prices Because They Are Correlated With Many Demand Factors," Critical Finance Review, now publishers, vol. 5(2), pages 177-206, December.
    23. Jie Chen & Mingzhi Hu, 2019. "What types of homeowners are more likely to be entrepreneurs? The evidence from China," Small Business Economics, Springer, vol. 52(3), pages 633-649, March.
    24. Daniel Paravisini & Veronica Rappoport & Enrichetta Ravina, 2017. "Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios," Management Science, INFORMS, vol. 63(2), pages 279-297, February.
    25. Marjorie Flavin & Shinobu Nakagawa, 2008. "A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence," American Economic Review, American Economic Association, vol. 98(1), pages 474-495, March.
    26. Zanetti, Francesco, 2014. "Housing and relative risk aversion," Economics Letters, Elsevier, vol. 123(1), pages 23-25.
    27. Haltiwanger, John & Hurst, Erik & Miranda, Javier & Schoar, Antoinette (ed.), 2017. "Measuring Entrepreneurial Businesses," National Bureau of Economic Research Books, University of Chicago Press, number 9780226454078.
    28. Sari Pekkala Kerr & William R. Kerr & Ramana Nanda, 2015. "House Money and Entrepreneurship," Harvard Business School Working Papers 15-069, Harvard Business School.
    29. Tan, Ya & Wang, Zhi & Zhang, Qinghua, 2020. "Land-use regulation and the intensive margin of housing supply," Journal of Urban Economics, Elsevier, vol. 115(C).
    30. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 423-423.
    31. Feng Hu, 2014. "Risk Attitudes and Self-employment in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(3), pages 101-120, July.
    32. Stefano Corradin & Alexander Popov, 2015. "House Prices, Home Equity Borrowing, and Entrepreneurship," The Review of Financial Studies, Society for Financial Studies, vol. 28(8), pages 2399-2428.
    33. Zekai He & Jingjing Ye & Xiuzhen Shi, 2020. "Housing wealth and household consumption in urban China," Urban Studies, Urban Studies Journal Limited, vol. 57(8), pages 1714-1732, June.
    34. repec:hal:spmain:info:hdl:2441/75koqefued8i7pihbrl9u84p4u is not listed on IDEAS
    35. Kerwin Kofi Charles & Erik Hurst & Matthew J. Notowidigdo, 2018. "Housing Booms and Busts, Labor Market Opportunities, and College Attendance," American Economic Review, American Economic Association, vol. 108(10), pages 2947-2994, October.
    36. Jing Wu & Yongheng Deng & Hongyu Liu, 2014. "House Price Index Construction in the Nascent Housing Market: The Case of China," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 522-545, April.
    37. Shing-Yi Wang, 2012. "Credit Constraints, Job Mobility, and Entrepreneurship: Evidence from a Property Reform in China," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 532-551, May.
    38. Hu, Mingzhi & Su, Yinxin & Ye, Wenping, 2019. "Promoting or inhibiting: The role of housing price in entrepreneurship," Technological Forecasting and Social Change, Elsevier, vol. 148(C).
    39. Harding, John P. & Rosenthal, Stuart S., 2017. "Homeownership, housing capital gains and self-employment," Journal of Urban Economics, Elsevier, vol. 99(C), pages 120-135.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yongzhi Sun & Qiong Ma & Li Gan, 2024. "The Impact of Curbing Housing Speculation on Household Entrepreneurship in China," Sustainability, MDPI, vol. 16(5), pages 1-29, February.
    2. Cheng, Zhiming & Tani, Massimiliano & Wang, Haining, 2021. "Energy poverty and entrepreneurship," Energy Economics, Elsevier, vol. 102(C).
    3. Xiaofen Yu & Dingpei Hu & Mingzhi Hu, 2024. "Unveiling the impact of housing debt on entrepreneurship: Evidence from China," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 11(2), May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kerr, Sari Pekkala & Kerr, William R. & Nanda, Ramana, 2022. "House prices, home equity and entrepreneurship: Evidence from U.S. census micro data," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 103-119.
    2. Bracke, Philippe & Hilber, Christian A.L. & Silva, Olmo, 2018. "Mortgage debt and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 103(C), pages 52-66.
    3. Saleem Bahaj & Angus Foulis & Gabor Pinter, 2016. "The Residential Collateral Channel," Discussion Papers 1607, Centre for Macroeconomics (CFM), revised Jun 2016.
    4. Harding, John P. & Rosenthal, Stuart S., 2017. "Homeownership, housing capital gains and self-employment," Journal of Urban Economics, Elsevier, vol. 99(C), pages 120-135.
    5. Saleem Bahaj & Angus Foulis & Gabor Pinter, 2020. "Home Values and Firm Behavior," American Economic Review, American Economic Association, vol. 110(7), pages 2225-2270, July.
    6. Han, Bing & Han, Lu & Zhou, Zhengyi, 2020. "Housing Market and Entrepreneurship: Micro Evidence from China," MPRA Paper 102597, University Library of Munich, Germany, revised 17 Aug 2020.
    7. da Fonseca, João Galindo & Pannella, Pierluca, 2023. "The housing boom and selection into entrepreneurship," Labour Economics, Elsevier, vol. 85(C).
    8. Jensen, Thais Laerkholm & Leth-Petersen, Søren & Nanda, Ramana, 2022. "Financing constraints, home equity and selection into entrepreneurship," Journal of Financial Economics, Elsevier, vol. 145(2), pages 318-337.
    9. Ms. Yu Shi, 2018. "Sectoral Booms and Misallocation of Managerial Talent: Evidence from the Chinese Real Estate Boom," IMF Working Papers 2018/221, International Monetary Fund.
    10. Fan, Gang-Zhi & Li, Han & Li, Jiangyi & Zhang, Jian, 2022. "Housing property rights, collateral, and entrepreneurship: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 143(C).
    11. Steven J. Davis & John Haltiwanger, 2024. "Dynamism Diminished: The Role of Housing Markets and Credit Conditions," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(2), pages 29-61, April.
    12. Ma, Chao & Zhang, Shuoxun, 2024. "Can housing booms elevate financing costs of financial institutions?," Journal of Development Economics, Elsevier, vol. 167(C).
    13. Ross Levine & Yona Rubinstein, 2018. "Selection into Entrepreneurship and Self-Employment," NBER Working Papers 25350, National Bureau of Economic Research, Inc.
    14. Szumilo, Nikodem & Vanino, Enrico, 2021. "Mortgage affordability and entrepreneurship: Evidence from spatial discontinuity in Help-to-Buy equity loans," Journal of Business Venturing, Elsevier, vol. 36(4).
    15. Aymeric Bellon & J. Anthony Cookson & Erik P. Gilje & Rawley Z. Heimer, 2020. "Personal Wealth and Self-Employment," NBER Working Papers 27452, National Bureau of Economic Research, Inc.
    16. Hu, Mingzhi & Su, Yinxin & Ye, Wenping, 2019. "Promoting or inhibiting: The role of housing price in entrepreneurship," Technological Forecasting and Social Change, Elsevier, vol. 148(C).
    17. Naqun Huang & Jing Li & Amanda Ross, 2022. "Housing wealth shocks, home equity withdrawal, and the claiming of Social Security retirement benefits," Economic Inquiry, Western Economic Association International, vol. 60(2), pages 620-644, April.
    18. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Centre for Economic Performance, LSE.
    19. Zhang Juanfeng & Lin Yupiaopiao & Han Rui & Li Lele & Zeng Hui, 2024. "Do high housing prices inhibit entrepreneurial activity?—Evidence from Yangtze River Delta cities, China," Growth and Change, Wiley Blackwell, vol. 55(3), September.
    20. Li, Lixing & Wu, Xiaoyu, 2019. "Housing price and intergenerational co-residence in urban China," Journal of Housing Economics, Elsevier, vol. 45(C), pages 1-1.

    More about this item

    Keywords

    Housing wealth changes; Entrepreneurship; Channels; China;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:69:y:2021:i:c:s1043951x21000742. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.