Regional housing wealth, relative housing wealth and labor market behavior

This paper introduces a relative measure of housing wealth to explain the difference in effects between self-reported and regional housing wealth. Our theoretical model predicts a negative (positive) relationship between individual housing wealth (regional housing wealth) and labor supply. By using China’s housing market boom, we find that self-reported housing wealth significantly reduces homeowners’ working hours while regional housing wealth does not significantly affect their labor supply. Moreover, the results show that the negative effect of housing wealth on labor supply is mainly driven by the change of relative housing wealth. Further, several robustness checks are performed to corroborate the validity of our identification strategies and to test the sensitivity on the effect of relative housing wealth.