China’s Housing Reform and Labor Market Participation

The 1994–1998 housing reform in China allowed state employees to buy their rented public houses at considerably subsidized prices. By exploiting housing reform as an exogenous change in homeownership and employing a differences-in-differences framework, this paper examines the effect of housing reform on labor market participation. Using the data from China Health and Nutrition Survey, we find that individuals who are affected by the housing reform are 15.1 percentage points less likely to participate in labor market after controlling for observables. We further find that married women are 18.9 percentage points more likely to drop out of labor market after the housing reform, while their male counterparts are only 10.0 percentage points less likely to participate in labor market after the reform. We also explore mechanisms through which the housing reform may affect married women more greatly. Family division of labor hypothesis suggests that, in an efficient family husband should act as the “breadwinners” and wife be a caregiver and responsible for raising the family. We test this hypothesis and find strong evidence that married women in fact spend more time in family chores after the housing reform. Our findings are robust to alternative estimations and functional misspecifications.