Housing Market and Entrepreneurship: Micro Evidence from China
35 Pages Posted: 25 Aug 2020
Date Written: August 17, 2020
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: Suggested Citation