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Status Competition and Housing Prices

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  • Shang-Jin Wei
  • Xiaobo Zhang
  • Yin Liu

Abstract

While in standard housing economics housing is regarded as an asset and a consumption good, we study in this paper the consequences for housing prices if housing is also a status good. More concretely, if a family's housing wealth relative to others is an important marker for relative status in the marriage market, then competition for marriage partners might motivate people to pursue a bigger and more expensive house/apartment beyond its direct consumption (and financial investment) value. To test the empirical validity of the hypothesis, we have to overcome the usual difficulty of not being able to observe the intensity of status competition. Our innovation is to explore regional variations in the sex ratio for the pre-marital age cohort across China, which likely has triggered variations in the intensity of competition in the marriage market. The empirical evidence appears to support this hypothesis. We estimate that due to the status good feature of housing, a rise in the sex ratio accounts for 30-48% of the rise in real urban housing prices in China during 2003-2009.

Suggested Citation

  • Shang-Jin Wei & Xiaobo Zhang & Yin Liu, 2012. "Status Competition and Housing Prices," NBER Working Papers 18000, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18000
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    References listed on IDEAS

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    2. 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.
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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