Housing prices and labor cost stickiness: Evidence from China

Abstract

Based on firm-level data from 2007 to 2020, this study examines the influence of housing prices on labor cost stickiness. The results show that housing prices strengthen firms’ labor cost stickiness. The strengthening effect is particularly pronounced in high-tech industries and during periods of high economic policy uncertainty. Moreover, as the observation period extends, the impact of housing prices on labor cost stickiness diminishes. Further analysis reveals that housing prices have a reinforcing effect on stickiness in terms of employee numbers, with no significant impact on per capita remuneration stickiness. This study indicates that a company will need to allocate additional resources toward investment in machinery and equipment to address the labor cost stickiness stemming from the housing price surge.