Housing wealth changes and entrepreneurship: Evidence from urban China

Shimeng Liu and Sisi Zhang

China Economic Review, 2021, vol. 69, issue C

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.

Keywords: Housing wealth changes; Entrepreneurship; Channels; China (search for similar items in EconPapers)
JEL-codes: J20 O18 R20 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:69:y:2021:i:c:s1043951x21000742

DOI: 10.1016/j.chieco.2021.101656

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