Who Marries Whom in a Surging Housing Market

60 Pages Posted: 17 Feb 2018

See all articles by Ang Sun

Ang Sun

Renmin University of China - Hanqing Institute

Qinghua Zhang

Peking University - Guanghua School of Management

Date Written: February 17, 2018

Abstract

This paper investigates the impact of a surging housing market on marital sorting. To cover the increasingly large down payments required in China today, both spouses’ parents have to hand over their resources to support the couple in purchasing a new home. The incentive to extend credit to make a down payment motivates individuals to “marry up,” and, therefore, predicts an equilibrium of positive assortative matching by parental wealth. Our difference-in-differences analysis shows that the partial correlation of paternal schooling years between the spouses increases by 0.118 if the down payment doubles and by 0.258 as the price growth rate doubles. Despite increasing social stratification, we find that a prenuptial agreement involving a shared housing asset can alleviate marital sorting: the assortativeness weakened after China’s divorce laws were reformed to award the share of the asset proportionate to the share of the initial down payment (rather than awarding equal shares) upon divorce.

Keywords: Marriage Matching, Credit Constraint, Inequality, Housing Market

JEL Classification: D13, J12, R21

Suggested Citation

Sun, Ang and Zhang, Qinghua, Who Marries Whom in a Surging Housing Market (February 17, 2018). Available at SSRN: https://ssrn.com/abstract=3125234 or http://dx.doi.org/10.2139/ssrn.3125234

Ang Sun (Contact Author)

Renmin University of China - Hanqing Institute ( email )

59 Zhongguancun Street
Beijing, 100872
China

Qinghua Zhang

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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