The effect of homeownership on migrant household savings: Evidence from the removal of home purchase restrictions in China

Abstract

Internal migrants account for over one-fourth of China's population, and their saving behavior is important in explaining “the Chinese saving puzzle”. The relation between household savings and house prices has been studied, but this paper utilizes a quasi-experiment that removed home purchase restrictions to examine the causal effect of homeownership on migrant household savings through a difference-in-differences approach and instrumental variable estimation. We find that the migrant saving rate significantly decreases after migrants buy houses, falling below that of the local hukou population. Further analysis reveals that this effect of homeownership can be explained by the consumption effect rather than housing purchase or increased household income effects. Our findings imply that hukou-based policies, including the allocation of public goods and the right to buy private goods such as houses, will harm both migrant welfare and sustained economic growth.