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Housing wealth changes and entrepreneurship: Evidence from urban China

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  • 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
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    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.

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    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

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