Housing Price Pressure and Employee Lawsuits: Evidence From China

ABSTRACT This study explores how rising housing prices affect employee–employer conflict through the lens of employee lawsuits. Using a sample of Chinese listed firms from 2013 to 2019, we find that the likelihood of employee lawsuits against a firm increases with housing prices in the city where the firm is located. To establish causality, we employ a staggered difference‐in‐differences approach based on the implementation of home purchase restriction policies designed to curb housing price growth, and we also use land supply as an instrument for housing prices. Mechanism and cross‐sectional analyses show that psychological pressure can be the key mechanism driving employee lawsuits. Additional analyses demonstrate that housing price pressure leads to substantiated employee lawsuits instead of vexatious lawsuits. Also, it does not significantly increase other types of litigation, indicating that the psychological pressure primarily affects internal labor relations rather than external stakeholder disputes. These findings indicate that external cost‐of‐living pressures can erode workplace relations and escalate labor conflict. Overall, our paper provides novel evidence on how macroeconomic housing market conditions shape employee–employer dynamics and labor litigation.