Housing Market and Entrepreneurship: Micro Evidence from China

35 Pages Posted: 25 Aug 2020

See all articles by Bing Han

Bing Han

University of Toronto, Rotman School of Management

Lu Han

University of Toronto - Rotman School of Management

Zhengyi Zhou

Shanghai University of Finance and Economics

Date Written: August 17, 2020

Abstract

Using a unique survey data of Chinese households, we study the impact of house price growth and house price risk on entrepreneurship. House price risk, measured as the sensitivity of house price growth to local GDP growth, negatively impacts the entrepreneurship of homeowners relative to renters. This finding is concentrated only among sophisticated households and is consistent with the portfolio effect when housing and occupational choices are integral parts of the household portfolio. Moreover, a high past house price growth reduces the entrepreneurship of homeowners relative to renters. This holds for both sophisticated and unsophisticated households. We propose a new economic channel based on extrapolative belief and provide further supportive evidence.

Keywords: Entrepreneurship; Housing Market; Extrapolative Belief

JEL Classification: D10, G11, L26, R12, R31

Suggested Citation

Han, Bing and Han, Lu and Zhou, Zhengyi, Housing Market and Entrepreneurship: Micro Evidence from China (August 17, 2020). Available at SSRN: https://ssrn.com/abstract=3676832 or http://dx.doi.org/10.2139/ssrn.3676832

Bing Han (Contact Author)

University of Toronto, Rotman School of Management ( email )

Toronto, Ontario M5S 3E6
Canada
4169460732 (Phone)

Lu Han

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Zhengyi Zhou

Shanghai University of Finance and Economics ( email )

100 Wudong Road
Shanghai, Shanghai 200433
China

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