In China’s regulated housing markets, a married couple may choose strategically to divorce in order to purchase more houses and/or purchase with more favorable financial conditions. Our study examines the propensity for strategic divorce induced by housing market regulations in China. To overcome the difficulty of using conventional divorce data to distinguish between a “true” divorce and a strategic (or a “fake”) divorce, we design an identification strategy using data on internet searches for divorce- and marriage-related keywords in 32 Chinese major cities from 2009 through 2016. Our difference-in-differences estimates provide robust evidence that housing market regulations significantly increase the propensity for strategic divorce. Our results also show that the increase in the propensity for strategic divorce is weaker in cities with higher male–female ratios and with stronger Confucian ideologies. These findings point to the role that housing market regulations play in distorting a family’s choices, as well as to the importance for policymakers to consider unintended impacts of regulations.
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Throughout this study, we use the term “true divorce” to refer to getting divorced due to unhappy matches, and we use “strategic divorce” or “fake divorce” to refer to divorces whose goal is to attain some economic benefits.
Li and Wu (2014) have shown that high housing prices discourage entrepreneurship, as the extremely high returns make talented people forgo innovative activities and dive in the housing market speculation.
This TV series created a historic audience rating, and its ending episode received a rating of 8 percent. It was also popular in Taiwan and Japan at that time. Due to the sensitivity of its story, censorship authorities banned its broadcast. A staff member of Beijing TV station claimed that the ban was due to real estate businesses’ lobbying. All in all, these suggest serious social grievances resulting from high housing prices. (See Ang (2020) pp. 147; Wikipedia https://en.wikipedia.org/wiki/Dwelling_Narrowness (in Chinese), retrieved on January 24, 2021, also available as supplemental materials upon request).
Whether suppressing demand is the best way to cool down the housing market is beyond the scope of this paper. We take these regulations as given, and we evaluate their impacts on divorce propensity.
This expectation is more likely given that strategic divorces enable households to get around regulations.
See CNN report on October 18, 2010 (http://travel.cnn.com/shanghai/life/faking-divorce-buy-home-shanghai-924307/, retrieved on December 3, 2018, also available as supplemental materials upon request).
See BBC report on September 2, 2016 (https://www.bbc.com/news/blogs-trending-37257747, retrieved on December 3, 2018, also available as supplemental materials upon request).
Again, see CNN report on October 18, 2010 (http://travel.cnn.com/shanghai/life/faking-divorce-buy-home-shanghai-924307/, retrieved on December 3, 2018, also available as supplemental materials upon request).
There are four directly controlled municipalities: Beijing, Shanghai, Tianjin, and Chongqing.
There are five self-planning cities: Dalian, Ningbo, Qingdao, Xiamen, and Shenzhen. They are economically prosperous or politically important, and they are given greater autonomy in drafting economic policies independent of provinces they locate in.
See https://en.wikipedia.org/wiki/Baidu retrieved on January 24, 2021.
Note that data from both the Baidu Index and Google Trends are not equal to actual search volumes, but are transformed from actual search volumes through some algorithms. We do not know the statistical procedures behind the Baidu Index, but, as argued by Qin and Zhu (2018), Baidu Index data are approximately proportional (or linear) to actual search volumes. Therefore, the transformation should not lead to any significant distortions of the Baidu Index in representing people’s online behavior.
To the best of our knowledge, there are no particular criteria for the correlation coefficient to determine a good proxy. But compared to existing literature, we deem that it is not too risky to assert a good proxy based on a correlation coefficient of 0.7 (e.g., Stephens-Davidowitz 2014, where the author got correlation coefficients about 0.6–0.66 between Google Trends data and commonly used measurements).
Chen et al. (2020) provide a comprehensive discussion about the possible connections between the strength of Confucian ideologies and their historical origin. See also Kung and Ma (2014).
Step 2 essentially examines the possibility that housing market regulations may be correlated with some factors increasing marriages and so may lead to more divorce-related searches (given the precautionary search story). It is not very likely that housing market regulations per se would increase marriages.
Qin and Zhu (2018) and Zhang and Mu (2018) implement the Poisson regression models with internet searches as the outcome variable. Here we implement PPML estimations, which is more robust to specification errors than the Poisson maximum likelihood estimation (Gourieroux et al. 1984). PPML estimates can be roughly interpreted as those in a log-level linear regression.
This magnitude is based on the calculation that 0.824 × 0. 029/0.123 = 0.194.
Confucianism emphasizes the harmony of interpersonal relationships, where family stability is an important content. Hence, destroying a family would be regarded as an ideological betrayal. Also, Confucianism opposes any pursuit of wealth at the expense of harmony. As Confucius said, “It is void for me to seize wealth in an unjust way.”.
Note that 3.22e − 5 × 547 = 0.0176.
For example, see the Tencent News report on November 14, 2017.
(https://news.house.qq.com/a/20171114/003890.htm, retrieved January 24, 2021, also available as supplemental materials upon request). As reported there, a couple got divorced for better loan conditions. After the divorce, the husband put one old house under his wife’s name, and purchased a second house together in his name together with his wife. They re-married after that. However, the couple now intends to divorce owing to family struggles, and the husband is on the verge of losing his property rights for the old house because it is under his wife’s name and it cannot not be divided by a divorce.
According to Xinhua News (http://sh.xinhuanet.com/2021-01/22/c_139688366.htm, retrieved January 24, 2021, also available as supplemental materials upon request), starting from January 21, 2021, a divorced couple in Shanghai is subject to housing market regulations that consider two spouses still married in the first three years of a divorce, a provision that invalidates playing the strategic divorce game.
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The authors thank editor Shuaizhang Feng and two anonymous reviewers for helpful comments.
This research is supported by the Natural Science Foundation of China (No. 71602149) and National Social Science Foundation of China (20&ZD168).
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The authors declare no competing interests.
Responsible editor: Shuaizhang Feng
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Timetable of regulatory policies
Cities are listed in the chronological order of initial regulations.
Housing market regulations and online searching
Baidu Index keywords
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Alm, J., Lai, W. & Li, X. Housing market regulations and strategic divorce propensity in China. J Popul Econ 35, 1103–1131 (2022). https://doi.org/10.1007/s00148-021-00853-2
- Housing market regulations
- Strategic divorce
- Baidu Index