The Impact of Housing Valuation on Labor Income：Does China Have a Frustration for Stable Preference?

Abstract

The housing price continues to rise in the high level, which is the most eye-catching reality in China’s economic development during recent years, and it is directly related to people’s basic housing needs to meet. The rise of housing price will affect many aspects of economic development, and relevant studies are very complete. However, there are still some deficiencies in the existing studies on the relationship between the housing price and labor income and wages. This article points out that the rise in housing valuation will prompt the workforce to engage in relatively stable work with relatively low income, and explains the phenomenon of declining labor income from the perspective that the increasing housing valuation will strengthen the labor force’s preference for stable income. The construction of a risk career selection model and the study of CHIPS data find that: （1）The increase in housing valuation has a U-shaped curve effect on the labor income.（2）Since the housing price cannot continue to rise unrestrictedly, there is indeed a frustration for stable preference in the Chinese labor market caused by the rising housing price.（3）Although the housing provident fund mechanism has, to a certain extent, weakened the distortions in labor market efficiency caused by the rising housing price, it cannot fundamentally solve the frustration for stable preference. The above conclusions are passed through a series of robustness and placebo tests, and are retested using the historical commercial land transfer price that first appeared in the interviewee’s district as an instrument variable. This article also screens the mechanism of “causing inertia due to housing” that may interfere with this story.