Housing Market Regulations and Strategic Divorce in China

31 Pages Posted: 13 Nov 2019 Last revised: 27 Feb 2020

See all articles by James Alm

James Alm

Tulane University

Weizheng Lai

University of Maryland - Department of Economics

Xun Li

Wuhan University - Economics and Management School

Date Written: February 25, 2020

Abstract

In China’s regulated housing markets, a married couple may strategically choose to divorce in order to purchase more houses and/or purchase with more favorable leverages. Our study examines the strategic divorce behavior induced by two major types of housing market regulations in China, quota restrictions and credit restrictions. To overcome the difficulty of using conventional divorce data to disentangle a “real” divorce and a strategic (or a “fake”) divorce, we design an identification strategy with data on internet searches for divorce- and marriage-related keywords in 34 Chinese major cities from 2009 through 2016. Our estimates provide robust evidence that these regulations significantly increase the propensity of strategic divorce. Our findings point to the role that housing market regulations play in distorting family’s behavior, as well as to the importance of considering the unintended impacts of regulations.

Keywords: Housing market regulations; strategic divorce; Baidu Index

JEL Classification: D78; J12; J18; L50; R21

Suggested Citation

Alm, James and Lai, Weizheng and Li, Xun, Housing Market Regulations and Strategic Divorce in China (February 25, 2020). Available at SSRN: https://ssrn.com/abstract=3480934 or http://dx.doi.org/10.2139/ssrn.3480934

James Alm

Tulane University ( email )

United States
5048628344 (Phone)

Weizheng Lai (Contact Author)

University of Maryland - Department of Economics ( email )

United States

Xun Li

Wuhan University - Economics and Management School ( email )

Hubei
China

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