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The impact of a positive wealth shock on consumption: evidence from a housing reform in China

Author/s: Xinghua Liu, Satish Chand

Date Published: 03/05/2020

Published in: Volume 26 - 2020 Issue 2 (pages 115 - 129)

Abstract

Housing property reform in China exerted an exogenous positive wealth shock to state employees who were renting state-owned housing when they were offered the opportunity to buy their homes at highly subsidised prices. Exploiting the national representative micro data set CHIP, we study the consumption response to this large-scale housing property reform. Propensity Score Matching (PSM) strategy is implemented to balance the covariates between a treatment group and a control group. We find that the positive wealth shock has led to an increase in household consumption for the treatment group. Our results provide new insights into consumer response to positive shocks associated with access to home equity and wealth transfer through housing.

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Keywords

China - Household Consumption - Housing Reform - Psm - Wealth Shock

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