August 2023

IZA DP No. 16386: Housing Unaffordability and Adolescent Academic Achievement in Urban China

Peng Nie, Qiaoge Li, Lanlin Ding, Alfonso Sousa-Poza

Rising housing prices in China have placed significant financial strain on many households, pushing them into the quagmire of housing unaffordability. Such economic pressures may have repercussions beyond just shelter, potentially impacting the cognitive development of children. Our study, based on longitudinal data from the 2010-2018 China Family Panel Studies, analyses the effect of housing unaffordability on the academic achievements of Chinese adolescents aged 10-18. To address the inherent endogeneity issues associated with housing unaffordability, we employed a fixed effects instrumental variable approach. Our findings reveal that housing unaffordability leads to a decline in academic performance for these adolescents by an average of 12%. This negative effect is more pronounced for specific groups: rural-to-urban migrant families, girls who have male siblings, families who rent, older adolescents (aged 13 to 18), and those residing in less developed regions. Moreover, the results suggest that housing unaffordability adversely affects academic performance indirectly by diminishing household expenditures in critical areas. When housing becomes unaffordable, families have less to spend on food, social capital, and education, further exacerbating the challenges faced by their adolescent children in the academic arena.