On the Effectiveness of Housing Purchase Restriction Policy in China: A Difference in Difference Approach

46 Pages Posted: 25 Mar 2015

See all articles by Jerry Cao

Jerry Cao

Independent

Bihong Huang

University of Macau - Department of Finance and Business Economics

Rose Neng Lai

University of Macau

Date Written: March 23, 2015

Abstract

The Chinese government imposed the purchase restriction policy to rein in the housing bubble in 2010. Using a two-stage difference-in-difference approach and a comprehensive dataset covering the real estate markets across 70 cities, we find that the policy triggered substantial decline in the property price and transaction volume. Cities having higher reliance on real estate sector for fiscal revenue and economic growth experienced greater decline in housing prices following the policy implementation. However, the policy had no measurable effects on the nationwide construction boom, hinting the ineffectiveness of the policy to correct the housing bubble.

Keywords: housing purchase restriction policy, housing bubble, China, difference in difference

JEL Classification: G12, G18, H83

Suggested Citation

Cao, Jerry and Huang, Bihong and Lai, Rose Neng, On the Effectiveness of Housing Purchase Restriction Policy in China: A Difference in Difference Approach (March 23, 2015). Available at SSRN: https://ssrn.com/abstract=2584275 or http://dx.doi.org/10.2139/ssrn.2584275

Jerry Cao

Independent

No Address Available

Bihong Huang (Contact Author)

University of Macau - Department of Finance and Business Economics ( email )

Macau

Rose Neng Lai

University of Macau ( email )

Av. Da Universidade, Taipa
Macau, Nil
Macau

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