The Effect of House Price on Fertility: Evidence from Hong Kong

16 Pages Posted: 21 Jun 2010

See all articles by Junjian Yi

Junjian Yi

University of Chicago

Junsen Zhang

The Chinese University of Hong Kong (CUHK) - Department of Economics; IZA Institute of Labor Economics

Abstract

This article extends a standard Beckerian model of fertility behavior to formulate the effect of house price (HP) on fertility. The simple model predicts a negative effect of HP on the number of children for a representative household not only through the income effect but also through the compensated substitution effect. The prediction is confirmed by a cointegration analysis applied to the annual data at the aggregate level covering the period from 1971 to 2005 in Hong Kong. It is found that a 1% increase in HP is significantly related to a 0.45% decrease in total fertility rates (TFRs), which is robust in sensitivity tests with an alternative model specification and alternative measures of TFRs. This implies that high HP inflation can account for about 65% of the fertility decrease in Hong Kong in the past four decades.

Suggested Citation

Yi, Junjian and Zhang, Junsen, The Effect of House Price on Fertility: Evidence from Hong Kong. Economic Inquiry, Vol. 48, Issue 3, pp. 635-650, July 2010, Available at SSRN: https://ssrn.com/abstract=1627403 or http://dx.doi.org/10.1111/j.1465-7295.2009.00213.x

Junjian Yi (Contact Author)

University of Chicago ( email )

Junsen Zhang

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

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