The Unintended Consequences of Home-Buying Restriction in China

Abstract We investigate the fake divorce activities associated with the home-buying restriction policy in China. We find that the policy increased divorce rate (marriage restoration rate) in the treated cities by 0.436 (0.195) permillage point relative to the control cities. This explains a 19.9% increase in the overall national divorce rate, of which at least 45% can be interpreted as fake divorces. Moreover, we find that the main responders to this policy are people who are older, childless, less-educated, and wealthier. Finally, we show that the fraudulent behavior has significant implications for market efficiency, intra- and inter-household wealth inequality, and other consequences.