Financial Literacy, Housing Investment, and Household Entrepreneurship: Evidence from China

This study aims to examine the impact of financial literacy on the investment choices of Chinese households. It provides an empirical analysis of how the accumulation of financial literacy impacts entrepreneurial behavior and housing investment, using micro-data from the China Household Finance Survey (CHFS). Our empirical results indicate that increased financial literacy promotes housing investment while inhibiting entrepreneurial activities. One plausible explanation for the results is that households with basic financial literacy and home mortgage experiences are more familiar with real estate markets, thereby developing a “familiarity bias” toward the real estate sector. Consequently, they tended to prioritize housing investment over entrepreneurship. The excessive concentration of household assets in real estate may crowd out entrepreneurial activities, which in turn exacerbates the loss of social welfare. This study provides new insights into the economic implications of housing investment activities in this country.