THE EFFECT OF HOUSE PRICE ON FERTILITY: EVIDENCE FROM HONG KONG

Junjian Yi and Junsen Zhang

Economic Inquiry, 2010, vol. 48, issue 3, 635-650

Abstract: This article extends a standard Beckerian model of fertility behavior to formulate the effect of house price (HP) on fertility. The simple model predicts a negative effect of HP on the number of children for a representative household not only through the income effect but also through the compensated substitution effect. The prediction is confirmed by a cointegration analysis applied to the annual data at the aggregate level covering the period from 1971 to 2005 in Hong Kong. It is found that a 1% increase in HP is significantly related to a 0.45% decrease in total fertility rates (TFRs), which is robust in sensitivity tests with an alternative model specification and alternative measures of TFRs. This implies that high HP inflation can account for about 65% of the fertility decrease in Hong Kong in the past four decades. (JEL J13, J11, C32)

Date: 2010
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