Housing Prices, Inter-Generational Co-Residence, and 'Excess' Savings by the Young: Evidence Using Chinese Data

55 Pages Posted: 20 Aug 2019

See all articles by Mark R. Rosenzweig

Mark R. Rosenzweig

Yale University - Economic Growth Center; Yale University - Cowles Foundation

Junsen Zhang

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

Date Written: August 1, 2019

Abstract

In many countries of the world the co-residence of young adults aged 25-34 with their parents is not uncommon and in some countries the savings rates of these age groups exceed those of the middle-aged contrary to the standard model of life-cycle savings. In this paper we examine the role of housing prices in affecting the living arrangements of adult family members and their individual savings rates by age. Using unique data from China that enable the re-construction of whole families and identify individual savings regardless of who within the family co-resides in the same household, and exploiting the Chinese government rules determining the supply of land for residential housing, we find that increases in housing prices significantly increase inter-generational co-residence and elevate the savings rates of the young relative to the middle-aged, conditional on income, in part due to the subsidies to the young from sharing housing with parents. Based on our estimates of the effects of housing prices on co-residence and the effects of co-residence on individual savings, we find that the savings rates of the young in China would be 21% lower if housing prices were at the same ratio to disposable incomes as that observed in the United States.

Keywords: co-residence, young adults, housing

JEL Classification: O

Suggested Citation

Rosenzweig, Mark Richard and Zhang, Junsen, Housing Prices, Inter-Generational Co-Residence, and 'Excess' Savings by the Young: Evidence Using Chinese Data (August 1, 2019). Yale University Economic Growth Center Discussion Paper No. 1067, Available at SSRN: https://ssrn.com/abstract=3439507 or http://dx.doi.org/10.2139/ssrn.3439507

Mark Richard Rosenzweig (Contact Author)

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States
203-432-3620 (Phone)

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Junsen Zhang

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

Shatin, N.T.
Hong Kong

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