Title: Incomplete information within marriage: Buying House as the Signal of Commitment -- Evidence from Chinese Couple Shocked by Legal Change
Speaker: Kun Bao
Abstract: This paper studies how couples’ post-marriage investments in common assets are affected by external shock. Through a set of theoretical models, we illustrate that married couple in China have incentives to offset the adverse impact caused by the new marriage law in 2011, and the legal shock provides an opportunity for the husband to treat the house as a signal of commitment. Using the China Family Panel Studies (CFPS) data in the 2010-2016 period, we employ a continuous DID method and find that couples living in prefectures with higher divorce rates have higher probability of buying more houses after the legal shock compared with couples who lives in prefectures with lower divorce rates. We also provide evidence showing the mechanism that the signal of commitment is easier to send in the area with higher divorce rates. This finding is robust to various checks including using the number of “jinshi” in local history to proxy the prevalence of Confucian culture as instruments. Our finding reveals a feature of incomplete information rather than complete information within marriage in Chinese context, which has important implications for family studies and policy makers.
Dr. Kun Bao, graduated from University of Nottingham, is a lecturer in School of Economics and Management at Beijing Jiaotong University. His research includes labor economics, family economics, and public policy assessment.
Date: Friday, December 3, 2021
Time: 12:30-1:50pm.
Location: Online, Tencent Meeting
Online room number: 494-856-788
Online room password: 1203