Status Competition and Housing Prices

61 Pages Posted: 21 Apr 2012 Last revised: 8 Mar 2021

See all articles by Shang-Jin Wei

Shang-Jin Wei

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Xiaobo Zhang

International Food Policy Research Institute (IFPRI)

Yin Liu

Tsinghua University

Date Written: April 2012

Abstract

While in standard housing economics housing is regarded as an asset and a consumption good, we study in this paper the consequences for housing prices if housing is also a status good. More concretely, if a family's housing wealth relative to others is an important marker for relative status in the marriage market, then competition for marriage partners might motivate people to pursue a bigger and more expensive house/apartment beyond its direct consumption (and financial investment) value. To test the empirical validity of the hypothesis, we have to overcome the usual difficulty of not being able to observe the intensity of status competition. Our innovation is to explore regional variations in the sex ratio for the pre-marital age cohort across China, which likely has triggered variations in the intensity of competition in the marriage market. The empirical evidence appears to support this hypothesis. We estimate that due to the status good feature of housing, a rise in the sex ratio accounts for 30-48% of the rise in real urban housing prices in China during 2003-2009.

Suggested Citation

Wei, Shang-Jin and Zhang, Xiaobo and Liu, Yin, Status Competition and Housing Prices (April 2012). NBER Working Paper No. w18000, Available at SSRN: https://ssrn.com/abstract=2042985

Shang-Jin Wei (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Xiaobo Zhang

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States
202-862-5677 (Phone)
202-467-4439 (Fax)

Yin Liu

Tsinghua University ( email )

Tsinghua Yuan No. 1, Ming-Zhai 222
Beijing, 100084
China

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