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Housing Wealth as Precautionary Saving: Evidence from Urban China

Published online by Cambridge University Press:  25 January 2021

Gary Painter ,
Xi Yang Open the ORCID record for Xi Yang [Opens in a new window]  and
Ninghua Zhong
Gary Painter
Affiliation:
University of Southern California Price Center for Social [email protected]
Xi Yang*
Affiliation:
University of North Texas Department of Economics
Ninghua Zhong*
Affiliation:
Tongji University School of Economics and Management
*
[email protected] (corresponding author)
[email protected] (corresponding author)
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Abstract

This article provides new evidence on the housing-wealth effect on consumption using household panel data. A key advantage in studying the Chinese housing market is the absence of the collateral channel because households are prohibited from withdrawing housing equity. The results show that for every 1% increase in housing wealth, household consumption increases by 0.14%, suggesting an implied marginal propensity to consume out of housing wealth of 0.023. Further, we find that this marginal propensity to consume is the largest among employees who face greater income uncertainty, suggesting that precautionary-saving motives are driving the results.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 2 , March 2022 , pp. 761 - 789
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank an anonymous referee, Jennifer Conrad (the editor), Hanming Fang, Wenli Li, and Jiaxiong Yao, along with participants at the 2019 Asia Meeting of the Econometric Society, 2019 China Meeting of the Econometric Society, 2020 Chinese Economist Society Annual Conference, and 2021 American Real Estate and Urban Economics Association–Allied Social Science Associations (AREUEA-ASSA) Conference. Zhong acknowledges financial support sponsored by the National Social Science Foundation of China (Grant No. 19ZDA073), the National Natural Science Foundation of China (Grant No. 71973101), the National High-Level Talents Special Support Program (Young Top-Notch Talent Program), and the Fok Ying-Tong Education Foundation of China (Grant No. 161081).

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