Keeping up with the Zhangs and house price dynamics in China

Raoul Minetti, Tao Peng and Tao Jiang

Journal of Economic Dynamics and Control, 2019, vol. 109, issue C

Abstract: This paper studies the effect of social interactions on house price dynamics in China. We first present household-level evidence on Chinese households’ tendency to keep up with the home ownership status of their communities (“keep up with the Zhangs”). By means of a dynamic stochastic general equilibrium model, we then study the impact of these housing consumption externalities on housing demand and prices. Our Bayesian estimation and simulation reveal that these externalities significantly increase house prices in the long run (steady state) and amplify their response to shocks. Housing tax policies can mitigate the amplification effects.

Keywords: House prices; Social status concerns; Social multipliers (search for similar items in EconPapers)
JEL-codes: E3 E44 E71 R31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:109:y:2019:i:c:s0165188919301757

DOI: 10.1016/j.jedc.2019.103778

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