Offspring’s Uncertainty and Dynastic Decisions: Evidence from Urban China

Ying Fan (), Yidi Wang and Zan Yang ()
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Ying Fan: Department of Building and Real Estate, The Hong Kong Polytechnic University
Yidi Wang: Department of Economics, Communication University of Beijing, China
Zan Yang: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Teknikringen 10B, 100 44 Stockholm, Sweden

No 24/4, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: We investigate the impact of offspring’s income uncertainty associated with college enrollment on intergenerational decisions. We exploit the experiment of the national college entrance examination (NCEE) reform in China, which increases the uncertainty of households containing students of compulsory education age. Based on comprehensive survey data, we find that 1) offspring’s uncertainty arising from the NCEE reform significantly decreases household total consumption and shifts consumption structures toward intergenerational inputs and housing purchases; 2) additional housing demand can be attributed to a dynastic precautionary motivation, which has heterogeneous effects based on a status quo bias toward exposure to and perception of the reform; 3) the inclusion of illiquid housing assets tilts the portfolio of households toward safe and liquid financial assets, and this allocation adjustment makes households financially worse off.

Keywords: offspring’s uncertainty; national college entrance examination; consumption; asset allocation; China (search for similar items in EconPapers)
JEL-codes: D81 G51 R21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2024-02-21
New Economics Papers: this item is included in nep-cna and nep-ure
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