Fertility rate, inter-generation wealth transfer and housing price in China : a theoretical and empirical study based on the overlapping generation model

摘要

The objective of this paper is to investigate how fertility rates impact on housing price in the mechanism of inter-generation wealth transfer in China. With a new framework consisting of the altruistic behaviors in China, an enhanced overlapping generation model is established in the paper. It attempts to figure out the yet-to-explore mechanism of the inter-generation wealth transfer and the effect of the fertility rates of different generations on housing price. The theoretical model indicates for the first time that inter-generation wealth transfer has a positive effect on housing price, and such transfer is affected by both fertility rate and housing consumption of the previous generations. An empirical study is further conducted for verifying the theoretical thinking. The results provide solid evidence that a decrease in fertility rate of the middle age generation by 1%, which in turn fuels the inter-generation wealth transfer to the younger generation, drives up housing price by 0.391%. Likewise, the fertility rate of the older generation has a similar impact, a 1% increase resulting in an increase in housing price by 0.072%.