Peer effects in rural housing demand: Evidence from China

This paper utilizes data from the China Household Finance Survey 2011 to study peer effects in housing demand in rural China. We find that focal households' housing consumption is heavily influenced by peer households' housing consumption. Evidence from placebo tests, IV estimates and robust tests suggests that the relationship is causal. In addition, we show that status seeking and social learning play important roles in determining peer effects in the demand for rural houses. Finally, we explore the heterogeneity in peer effects and determine that the leading mechanism is status seeking.

Automated summary

This study uses data from the China Household Finance Survey 2011 to examine peer effects in housing demand in rural China. The findings suggest that the housing consumption of focal households is significantly influenced by the housing consumption of peer households. The study also reveals that status seeking and social learning play crucial roles in determining peer effects in the demand for rural houses.