Housing Wealth as Buffer for Old Age under Limited Mobility Rights, Credit Constraints, and Debt Aversion

• In Event: Households and Behavioral Responses in Developing Countries

Abstract

Housing wealth, the largest component of household wealth, plays an important role in shaping individual behaviors, especially when people retreat from the labor market due to age or health reasons, and when the social insurance network provides limited protection. Access barriers and timing of entrance to the credit market are key determinants of housing wealth accumulation (HWA), especially in contexts where credit constraints affect a high proportion of the population and where debt aversion is strong. China’s rapid urbanization, limited social insurance, and mobility restrictions make it an ideal context for this study. We construct a housing wealth accumulation model under credit constraints and debt aversion, which reveals how hukou-based disparities in credit access and mobility rights drive divergent asset allocation and accumulation patterns among urban residents. By analyzing nationwide survey datasets, we identify significant heterogeneity in credit constraints between urbanites of different hukou types and their associated housing assets due to institutional credit barriers and migration restrictions. Furthermore, exploiting aggregate housing prices in the survey and purchase years as instruments, our empirical analysis shows that accumulated housing wealth motivates demand for supplemental health insurance and private pensions among the middle-aged, and the effect is much higher among rural hukou residents than urban hukou residents. The results highlight the role of housing assets in buffering pension gaps and shaping late-life financial preparedness among the middle-aged in emerging markets and emphasize the urgency to address institutional barriers that hinder housing wealth accumulation among low-income, low-skilled, and socially marginalized groups.

Authors

• Yilin Hou, Syracuse University

• Liu Tian, Shanghai University of Finance and Economics

• Jing Xu, Southwestern University of Finance and Economics