Download This PaperCheating under Regulation: Evidence from “Yin-and-Yang” Contracts on Beijing’s Housing Market
46 Pages Posted: 14 Aug 2018 Last revised: 30 Jun 2020
Date Written: July 30, 2018
Abstract
House-purchasing regulations have frequently been adopted by the Chinese government to cool the overheated housing market. Under-reporting of transaction prices has also been widely employed by home buyers to reduce transaction taxes. This paper suggests that by under-reporting to a greater extent, regulations on the housing market can be evaded from the outset. The empirical section reveals the enlarged gap between the real price and the contract price in “Yin-and-Yang” contracts after the most stringent regulation in 2010 as well as two noticeable outcomes. First, a larger price gap increases liquidity pressure to buyers and thus may crowd out poor families and enlarge inequality. Second, the further reduced contract price causes considerable tax loss, which is estimated to be 1-1.5% of Beijing’s yearly fiscal income.
Keywords: Housing-purchasing Regulations; Black-white Contract; Liquidity Constraint; Enlarge Inequality
JEL Classification: R21; R31; R32
Suggested Citation: Suggested Citation