Impact of government intervention in the housing market: evidence from the housing purchase restriction policy in China |
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| Authors: | Yi Wu Yunong Li |
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| Institution: | 1. Department of Accounting, Business School, Jinan University, Guangzhou, P.R. China;2. Department of Finance, International School of Business &3. Finance, Sun Yat-sen University, Zhuhai, P.R. China;4. School of International Business, Southwestern University of Finance and Economics, Chengdu, P.R. China |
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| Abstract: | In 2010, a housing purchase restriction policy was announced by China’s central government and implemented gradually by several prefecture governments. In this article, we empirically investigate this policy’s effect on the housing market. Using a difference-in-difference framework, we show that the housing purchase restriction policy reduces housing prices and transaction amounts but does not influence the housing investment or construction markets. Moreover, upstream industry suffers more than downstream industry. The results are robust to a battery of robustness checks. Heterogeneity exists across cities. We find that first- and second-tier cities as well as highly urbanized cities experience great declines in housing prices after the policy’s implementation, especially cites that had high housing prices in 2010 and cities with high real estate investment as a proportion of fixed asset investment. However, the housing policy is less effective in curbing speculative demand. |
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| Keywords: | Housing purchase restriction policy difference-in-difference housing market China |
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