Xi Xian Forum on Income Distribution and Public Finance (Phase 44)
Topic:Incomplete information within Marriage: The Purchase of a House as a Signal of Commitment
Speaker: Dr Bao Kun
School of Economics and Management, Beijing Jiaotong University
Host：Professor Lu Yuanping
IIDPF
Time:Oct.9(Mon.),2023
Venue:Conference Room 119, Wenqin Building
Abstract:
This paper explores how marital commitment influences a couple’s post-marriage investment in common assets. Different from previous studies that assumed complete information within marriage, we have developed a game model that takes into account the signaling behavior when spouses operate under incomplete information. Utilising data from the China Family Panel Studies (CFPS) from 2010 to 2016 and treating the implementation of the new Marriage Law in 2011 as an external shock, we identified this signaling behavior and find that, on average, the legal shock boosted couple’s joint ownership of houses by 6.1%. This finding remains robust under various tests, including using the number of “jinshi” in local history to proxy the prevalence of Confucian culture as the instrumental variables. Furthermore, we offer evidence that elucidates the mechanism behind the effect: the legal shock reduced the level of commitment between spouses, with the house serving as a “signaling vehicle” from husband to wife. Our findings highlight the importance of commitment in household welfare and provide a new perspective on understanding marriage law and spousal interaction in China.
Speaker Profile:
Bao Kun is an Assistant Professor at the School of Economics and Management, Beijing Jiaotong University. He graduated from the University of Nottingham Business School with a PhD, and was fully funded by the Chancellor's Scholarship of the University of Nottingham and the China Scholarship Council. He is a member of Nottingham China Research Centre. He is the chairperson of the university-level talent project and enterprise horizontal project, and participates in several national natural science and social science foundation projects. His main research interests include household economics, development economics and corporate finance.