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4461In the past two decades, the sustained and rapid rise of housing prices has become a typical phenomenon in the process of China’s economic development. At the same time, the labor force participation rate has been declining, which is not conducive to promoting China’s sustained and stable economic growth through the demographic dividend. Classical economic theories show that when rising housing prices bring wealth appreciation, individuals may increase leisure consumption and reduce labor supply. Therefore, there may be a close relationship between the decline of China’s labor participation rate and the unilateral rise of housing prices.
Therefore, based on the theoretical model of labor participation in decision-making, combined with the data of China Household Finance Survey（CHFS）in 2013 and 2015, this paper studies the impact of housing prices on urban residents’ labor participation by using Probit model, BiProbit model and Conditional Mixed Process（CMP）estimation, and discusses the heterogeneity and mechanism of housing price impact. Furthermore, it introduces the “provincial per capita land acquisition area” as the instrumental variable of urban housing prices to alleviate the endogeneity. The results show that a 1% increase in housing prices will lead to an average decrease of 0.066 percentage points in the labor participation probability of homeowners. Specifically, it reduces the labor participation probability of both men and women within the family, increases the probability that only one person participates in the labor and both sides do not participate in the labor, and has a greater negative impact on the labor participation of women. The heterogeneity analysis shows that housing prices have a great negative impact on the labor participation of residents with low education level; housing prices have a positive impact on young people’s labor participation, and a negative impact on the labor participation of adults and the elderly, and the negative impact increases with age. The mechanism analysis shows that rising housing prices affect residents’ labor participation through the wealth effect, cost effect, and bequest motivation.
This paper has three main contributions: Firstly, different from the previous literature that examines the labor participation behavior of family members in isolation, this paper considers the correlation of family members’ labor participation behavior and uses the BiProbit model to jointly examine the impact of housing prices on the labor participation of couples. Secondly, unlike the previous literature, which mainly limits the research object to homeowners, married women, or elderly people, this paper takes married people in the labor market as the research object, and explains the declining trend of the labor participation rate in China from the perspective of rising housing prices. Thirdly, this paper relatively effectively verifies the wealth effect, cost effect, and bequest motivation of housing prices affecting the labor participation of family members. Among them, it also discusses the additional wealth effect of “parents’ property may belong to themselves in the future”. In general, the research of this paper has important implications for the government to regulate housing prices and promote social stability and healthy economic development. Therefore, in order to achieve social stability and sustainable economic development, the government should adopt policies to stabilize housing prices, improve the overall educational level of residents and provide support for young people to buy houses.
