Housing Market Regulations and Strategic Divorce in China

In China's regulated housing markets, a married couple may strategically choose to divorce in order to purchase more houses and/or purchase with more favorable leverages. Our study examines the strategic divorce behavior induced by two major types of housing market regulations in China, quota restrictions and credit restrictions. To overcome the difficulty of using conventional divorce data to disentangle a “real” divorce and a strategic (or a “fake”) divorce, we design an identification strategy with data on internet searches for divorce- and marriage-related keywords in 34 Chinese major cities from 2009 through 2016. Our estimates provide robust evidence that these regulations significantly increase the propensity of strategic divorce. Our findings point to the role that housing market regulations play in distorting family's behavior, as well as to the importance of considering the unintended impacts of regulations