On the Housing Provident Fund in China Open Access
Gong, Xiangyu (Spring 2018)
Published
Abstract
This thesis includes three papers studying the Housing Provident Fund (HPF henceforth) in China. HPF is a savings program founded by the Chinese government to assist households to save for housing expenditures and retirement. Chapter 1 reviews literature on topics of saving, retirement and savings plans, and housing across countries, with a special emphasis on China. Saving rate and homeownership rate in China are among the highest in the world. The HPF is a unique program links household saving and housing decisions in China. Chapter 2 and Chapter 3 builds on the literature and address issues surrounding the HPF program, which help better understand the role of the HPF in the economy and provide insight into studying other programs and policies. Chapter 2 implements a three-period partial-equilibrium life cycle model to examine the impact of HPF on housing demand and welfare. Two main features of HPF are incorporated into a standard life cycle model with borrowing constraint. The first feature is that contributions to the HPF are tax-free. The second feature is a withdrawal constraint which favors home-relate expenses. In particular, withdrawals prior retirement are allowed if the early withdrawals are used to cover home-related expenses. This model shows that HPF increases housing demand. Moreover, this model solves the optimal contribution rate of the HPF which maximizes welfare.
Chapter 3 uses Chinese household survey data to empirically investigate the other direction of the relationship between HPF ownership and housing demand, i.e. the impact of homeownership status on HPF ownership status. Since Chapter 2 shows that housing decision is affected by HPF enrollment status, the empirical model in this chapter disentangles the potential endogeneity of homeownership and HPF ownership status. The analysis shows that homeownership status significantly increases the probability of owning a HPF savings account after taking into account the potential endogeneity and controlling for other factors.
Table of Contents
Contents
1 Literature Review: On the Saving, Retirement Plans and Housing 1
1.1 Introduction...................................... 1
1.2 Empirical Studies................................... 2
1.2.1 Saving Behavior ............................... 2
1.2.2 Retirement Plans ............................... 4
1.2.3 Housing ................................... 8
1.3 Macroeconomics Literature.............................. 8
1.3.1 Saving Behavior ............................... 8
1.3.2 Retirement Plans ............................... 10
1.3.3 Housing ................................... 11
1.4 Chinese Housing Market and Policies ........................ 13
1.5 Concluding Remarks ................................. 16
2 A Life Cycle Analysis of the Housing Provident Fund in China 17
2.1 Introduction...................................... 18
2.2 Institutional Details.................................. 20
2.2.1 Background.................................. 20
2.3 Model......................................... 21
2.4 Parameters....................................... 24
2.5 Results ........................................ 25
2.6 Concluding Remarks ................................. 26
3 Disentangling the Housing Provident Fund Ownership Status and Homeownership in China 27
3.1 Introduction...................................... 28
3.2 Institutional Background, Data, and Facts ...................... 31
3.2.1 HPF and the Housing Reform in China ................... 31
3.2.2 HPF Ownership................................ 33
3.2.3 Other Social Welfare Programs in China................... 34
3.2.4 Data and Sample ............................... 35
3.2.5 Facts from the 2011 CHFS.......................... 36
3.3 Model Estimation and Identification ......................... 39
3.4 Results ........................................ 43
3.5 Discussion....................................... 46
3.6 ConcludingRemarks ................................. 46
Bibliography 47
List of Tables
1 Literatureby Topics. ................................. 55
2 Literatureby Methodologies. ............................ 56
3 Summary Statistics on Household Demographics from 2011 CHFS. . . . . . . . . 57
4 Household Ownership Rates of Saving Instruments (Unit: Percentage). . . . . . . . 58
5 HomeownershipbyAge. ............................... 59
6 HouseholdCharacteristicsbyHPFStatus. ...................... 60
7 DescriptiveStatisticsofTransformedVariables. . . . . . . . . . . . . . . . . . . . 61
8 Treatment Effect. ................................... 62
9 Regression Adjustment (RA) and Treatment Assignment Estimates for τATE.... 63
10 Regression Adjustment (RA) and Treatment Assignment Estimates for τATET. . . . 64
11 Marginal Effects of the Exogeneous and Endogenous Treatment Models. . . ... 65
List of Figures
1 Welfare by Contribution Rate. ............................ 66
2 HPF Participation by Employees and Employers in 2016. . . . . . . . . . . . . . . 67
3 Age Effects on Homeownership and HPF Participation Rates. . . . . . . . . . . . . 68
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