Tying the Knot in a New Home : Consumption Responses to a Pro-Marriage Housing Policy

This paper investigates the spillover effect from the housing market to the marriage market. In 2001, Singapore introduced the Build-to-Order (BTO) scheme to build and allocate new public housing to eligible Singaporean families. Using the BTO scheme in a quasi-natural experiment, we study how a pro-marriage public housing policy impacts marriages and divorces via a consumption channel. We merged three proprietary datasets on residences, housing transactions, and consumption in our empirical analyses. We found that married BTO residents below 35 years consume 12.4% less on average goods and 35% less on visible goods than married residents living in non-BTO housing estates. The drops in private consumption are more significant among married residents in the early 30s and females. We conducted an event study and found that married BTO residents significantly reduced their consumption, especially on visible goods from 1 year before to 1.5 years after moving into BTO flats, compared to their consumption 2 years before moving. We found no significant change in consumption for single BTO residents above 35 years, who are not bound to get married when buying a BTO flat. We observed a possible trade-off between private consumption and housing mortgages from the mortgage data, which supports the consumption friction hypothesis in the marriage. BTO scheme is likely to spur marriage decisions, though the consumption friction under financial constraints is associated with the marriage frictions