Time Preference And Housing Wealth Effects

At the present stage of our country,we are in a period of triple transformation of politics,economy and culture.The level of consumption among residents is the key factor for achieving sustainable economic development.All along,"low consumption and high savings" have constrained the rapid economic growth in our country.Our government has been taking measures so as to stimulate the effective consumption of residents,promote the steady growth of China’s GDP and enhance China’s economic strength continuously.According to China Household Finance Survey(CHFS),in 2013,China’s housing assets accounted for 59.6%of total household assets and its housing ownership rate was 87%.Housing assets in China’s urban household assets account for a large proportion,and its housing ownership rate is basically the same with a slight upward trend.Housing wealth is an increasingly important research topic in real estate economics and home finance.Housing wealth effect refers to the positive effect of the value change of housing wealth(housing asset)and consumption expenditure,that is,the increase of the value of housing wealth(housing asset)will increase residents’ consumption demand.With the improvement of housing ownership rate and housing price,housing wealth also has an increasingly important impact on household consumption expenditure,as the most important component of household wealth.Then studying on the impact of the housing assets appreciation on household consumption,analyzing the existence and direction of the housing wealth effect,and exploring the differences in the impact of the appreciation of housing assets on different types of consumption brought about by family heterogeneity,which is conducive to the formulation of a reasonable real estate market control policy,bringing into play the wealth effect brought by rising house prices and housing wealth effectively,promoting the further improvement of China’s consumption level,and expanding domestic demand to stimulate economic vitality.The growth of housing assets has a positive effect on household consumption expenditures.There is a big difference in the impact on the families with heterogeneity in objective aspects such as age,income,marital status and educational level.At the same time,due to the weak liquidity of housing assets,the growth of housing assets value can’t be immediately cashed and can’t bring about an increase in the disposable income of households currently.However,the growth of housing wealth can bring about the increase of the expected realizable income for households,thus affecting household consumption.The difference in the impact on consumption may be due to different families’ different responses to the increase of the expected realizable income resulting from the growth of housing wealth.Due to the different subjective attitudes of the family,the same increase of the expected realizable income will have a different impact on current consumption.In other words,given the increase of the expected realizable income of households,there is a discrepancy between different family with different time preferences which reflected in its household consumption change and its time distribution.The main research content of this paper is as follows:The main research method used in this paper is a combination of theoretical research and empirical research.Based on China Household Finance Survey(CHFS)database,this paper studies the influence of time preference on the housing wealth effect of urban families in China.And this paper tests the existence of housing wealth effect on the whole,household type and consumer types and other aspects.Mainly studies the following three issues:(1)Analyzing the existence and direction of the housing wealth effect;(2)Family heterogeneity:the influence of time preference on the housing wealth effect;(3)Difference of housing asset appreciation impacts on consumption of nondurable goods and durable goods and the influence of time preference on housing wealth effect reflect on different consumption.In theoretical research,by employing a two-period life-cycle model,this paper analyzes the direction of the housing wealth effect qualitatively.And then this paper studies the influence of time preference on the housing wealth effect to show the difference of housing wealth effect between different families different from time preference theoretically.The result of theoretical analysis shows that the bigger the inter-temporal discount rate is,the smaller the housing wealth effect will be.In empirical research,based on the China Household Finance Survey(CHFS)2011 dataset,this paper studies the housing wealth effect of China’s urban households.From the perspective of household heterogeneity,this paper divides urban households into two groups based on households’ different time preferences,and explores the impact of household time preference on housing wealth effect by employing multivariate linear regressions,IV regressions.The paper tests the robustness of the empirical model results,by using the regression on subsample to exclude the impact of extreme value on the regression results and constructing subsample containing families with housing years in 2007 and before to exclude the effects of "reverse causality".Based on the theoretical and empirical results,the main conclusions of this paper are as follows:Firstly,the analysis of the theoretical model shows that:(1)The appreciation of housing assets has a positive impact on the current consumption of the family,that is,the existence of the housing wealth effect is theoretically proved;(2)There is heterogeneity in the housing wealth effect of families with different time preferences.The housing wealth effect of impatient families is greater than that of patient families.Seceondly,the estimated coefficients of regressions of total sample and subsamples show as follows.Overall the housing wealth effect is significantly positive on the urban household sample,and the scale of wealth effects on aggregate consumption,nondurable consumption and durable consumption are almost the same;As different households types,housing wealth effect is different,which is larger for impatient families than patient families;As different consumption types,compared with aggregate consumptions and nondurable consumptions,impatient and patient families diverse from each other mostly on the housing wealth effect on durable consumptions.All in all,the results of empirical studies are consistent with the prediction of the theoretical model.Finally,the results of the robustness test of empirical research show that the main research conclusions of this paper are still robust after eliminating extreme values and excluding "reverse causality".Possible innovations in this paper include:(1)Different from the existing literature,those based on family risk attitudes to study the heterogeneity of housing wealth effects.This paper uses time preference as a grouping variable,which expands the research scope of the influence of family subjective attitude on housing wealth effect,and provides a new perspective for understanding the heterogeneity of family housing wealth effect;(2)This paper constructs a two-period life-cycle model framework suitable for analyzing the housing wealth effect,and qualitatively analyzes the impact of time preference on family housing wealth effect.(3)This paper uses the micro-survey data at the household level to test the relationship between time preference and family housing wealth effect,empirically study the differences in family housing wealth effects at different time preferences and compare and analyze different consumption types for the first time.