Author: James Alm, Weizheng Lai, Xun Li

Abstract

In China's regulated housing markets, a married couple may choose strategically to divorce in order to purchase more houses and/or purchase with more favorable financial conditions. Our study examines the propensity for strategic divorce induced by housing market regulations in China. To overcome the difficulty of using conventional divorce data to distinguish between a “true” divorce and a strategic (or a “fake”) divorce, we design an identification strategy using data on internet searches for divorce- and marriage-related keywords in 32 Chinese major cities from 2009 through 2016. Our difference-in-differences estimates provide robust evidence that housing market regulations significantly increase the propensity for strategic divorce. Our results also show that the increase in the propensity for strategic divorce is weaker in cities with higher male–female ratios and with stronger Confucian ideologies. These findings point to the role that housing market regulations play in distortin g a family’s choices, as well as to the importance for policymakers to consider unintended impacts of regulations.

Executive Summary

China's real estate market regulation policy may allow couples to obtain more favorable conditions for buying a house through divorce. This paper examines the tendency toward strategic divorce caused by China's real estate market regulation policies. By using internet search data of divorce and marriage-related terms in 32 major cities from 2009 to 2016, this paper distinguishes between true divorces and strategic divorces. The results of the double difference show that the real estate market regulation policy significantly increases the propensity for strategic divorce; the increase in the propensity for strategic divorce is less in cities where the ratio of males and females is higher and is more influenced by Confucianism. These findings confirm the unintended impact of housing market regulation policies on household choices.

This article was published online in the Journal of Population Economics, Issue 4, 2021. The journal is a B+ award journal of the School of Economics and Management, and the authors are sorted alphabetically by surname.

Paper link: https://link.springer.com/article/10.1007/s00148-021-00853-2