Research On The Effects Of Housing Demolition On Household Economic Behaviors

In recent years,all parts of our country have experienced massive housing demolition with the development of the economy and the acceleration of urbanization.The compensation from housing demolition may form an exogenous impact on household wealth and income,and then affect the household economic behaviors,such as labor supply,household entrepreneurship,consumption,savings and financial assets investment portfolio.The study on the impact of housing demolition on these economic behaviors can provide empirical evidence and support for the government to formulate policies to promote the full employment of residents,improve the consumption level of residents and expand the channels of property income of urban and rural residents,and has important theoretical and policy implications.In the framework of life cycle consumption theory,the entrepreneurial choice theory under liquidity constraints and other theoretical frameworks,this paper explores how housing demolition affects labor supply,household entrepreneurship,consumption,savings,financial assets investment portfolio and other household economic behaviors,using China Family Panel Studies(CFPS)and China Household Finance Survey(CHFS).This paper tests the random assignment of housing demolition and finds that housing demolition may be random within the same community.This paper exploits the trait to estimate the overall effects of housing demolition on labor supply,household entrepreneurship,consumption,savings and financial assets investment portfolio by controlling for the community fixed effects and the Difference-in-Difference(DID)method,and explores how housing demolition affects these household economic behaviors over time by the Event Study method,and gets the main conclusions as follows:First,housing demolition reduces labor force participation and farm work participation,but has no significant effect on non-farm wage participation.Housing demolition with monetary compensation reduces labor force participation and farm work participation.Housing demolition with only housing compensation reduces farm work participation but increases nonfarm wage employment participation.The negative impacts on labor force participation and farm work participation persist over time.Second,housing demolition has no significant effect on household entrepreneurship as a whole,but has a significant positive effect on rural household entrepreneurship and a significant negative effect on urban household entrepreneurship.Housing demolition with monetary compensation promotes rural household entrepreneurship,while housing demolition with only housing compensation reduces urban housing demolition.The positive effect on rural household entrepreneurship weakens and becomes insignificant over time,while the negative effect on urban household entrepreneurship keeps insistent over time.Third,housing demolition increases total consumption and non-durable goods consumption.Housing demolition with monetary compensation has a greater positive effect on total consumption and non-durable goods consumption,and housing demolition with only housing compensation has a greater positive effect on durable goods consumption.The positive effects on total consumption and non-durable goods consumption weaken over time,while housing demolition only has a significant positive effect on durable goods consumption in the short term.Fourth,housing demolition increases the household savings rate and the proportion of investment in risky financial assets and low-risk financial assets.Compared with housing demolition with only housing compensation,housing demolition with monetary compensation has a greater positive effect on the proportion of investment in risky financial assets and low-risk financial assets.The positive effect on the savings rate turns out to be negative over time,while the positive effect on the proportion of investment in risky financial assets and low-risk financial assets keeps insistent over time.The contributions of this paper are as follows.First,this paper exploits the Event Study method to explore how housing demolition affects labor supply,household entrepreneurship,consumption,savings and financial assets investment portfolio and other household economic behaviors over time.Most of the existing relevant studies rarely explore the dynamic influence of housing demolition on household economic behaviors,dynamic impact study is helpful to understand the impact process of income shock on these household economic behaviors in the life cycle of a family and the economic phenomenon that some housing demolition households return to poverty in the later period,and makes up for the deficiency of the existing relevant studies on the time dimension.Second,this paper takes advantage of the fact that housing demolition may be exogenous in the same community and alleviates possible endogeneity concerns by adding a community-fixed effect.Housing demolition may be affected by unobtainable community characteristics and other variables,there may be endogeneity concerns caused by missing variables,resulting in biased estimation results.Most of the existing studies on the effects of housing demolition on household entrepreneurship and financial assets investment portfolio have not solved the endogeneity concern of housing demolition,this paper makes up for the deficiency of this research.Third,this paper discusses the effects of housing demolition on labor supply,household entrepreneurship,consumption and financial assets investment portfolio comprehensively and systematically,and analyzes the effects of different compensation forms of housing demolition on entrepreneurship,consumption and financial assets portfolio.Most of the existing relevant studies have discussed the impact of housing demolition on certain kinds of household economic behaviors alone,but they lack systematic research on the impact of housing demolition on household economic behaviors and rarely analyze the effects of compensation forms of housing demolition on entrepreneurship,consumption and financial assets portfolio.This paper is helpful to understand possible effects of housing demolition on household economic behaviors comprehensively and deeply,and enriches the research on the impact of asset mobility on household economic behaviors under wealth and income shock,and complements the shortcomings of existing studies.