Local Effects of Global Capital Flows: A China Shock in the U.S. Housing Market

82 Pages Posted: 2 Mar 2021 Last revised: 27 Oct 2022

See all articles by Zhimin Li

Zhimin Li

Peking University - HSBC Business School

Leslie Sheng Shen

Federal Reserve Banks - Federal Reserve Bank of Boston

Calvin Zhang

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: March 1, 2021

Abstract

This paper studies the real effects of foreign real estate capital inflows. Using transaction-level data, we document (i) a "China shock" in the U.S. housing market characterized by surging foreign Chinese housing purchases after 2008; and (ii) "home bias" in these purchases, as they concentrate in neighborhoods historically populated by ethnic Chinese. Exploiting their temporal and spatial variation, we find that these capital inflows raise local employment, with the effect transmitted through a housing net worth channel. However, they displace local lower-income residents. Our results show that real estate capital inflows can both stimulate the real economy and induce gentrification.

Keywords: capital flows, employment, house price, displacement, China shock.

JEL Classification: F21, F38, E20, J21, R21

Suggested Citation

Li, Zhimin and Shen, Leslie Sheng and Zhang, Calvin, Local Effects of Global Capital Flows: A China Shock in the U.S. Housing Market (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3795914 or http://dx.doi.org/10.2139/ssrn.3795914

Zhimin Li

Peking University - HSBC Business School ( email )

HOME PAGE: http://zhimin-li.github.io

Leslie Sheng Shen (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

HOME PAGE: http://www.lsshen.com

Calvin Zhang

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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