A Quantitative Evaluation of the Housing Provident Fund Program in China
42 Pages Posted: 14 Apr 2017 Last revised: 2 Mar 2020
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A Quantitative Evaluation of the Housing Provident Fund Program in China
A Quantitative Evaluation of the Housing Provident Fund Program in China
Date Written: May 1, 2017
Abstract
The Housing Provident Fund (HPF) is the largest public housing program in China. It was created in 1999 to enhance homeownership. This program involves a mandatory saving scheme based on labor income. Past deposits are refunded when the worker purchases a house or retires. Moreover, the program provides mortgages at subsidized rates to facilitate these home purchases. I calibrate a heterogeneous-agent life-cycle model to quantify the effects of these polices. My analysis shows that a housing program with these features is expected to raise the rate of homeownership by 8.7 percentage points and to increase the average home size by 20%. I discuss the economic mechanisms by which these outcomes are achieved and which features of the HPF program are most effective. I also consider several extensions of the model such as requiring employers to contribute the program and allowing renters to withdraw funds from the HPF.
Keywords: Public Policy, Housing Provident Fund, Policy Evaluation, China, Life-cycle Model, Homeownership
JEL Classification: E2, E6, H3, R2, R3
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