*5.4. Sensitivity Analysis*

To elaborate on how the association between the rule of law and housing prices changes with the degree of public satisfaction with the quality of the law aspect of governance, we consult with respondents on a series of different questions, such as "How well does the local governmen<sup>t</sup> listen to the opinions and suggestions of the people when making major decisions?", "What about the integrity of the local government?", "How effective is the local governmen<sup>t</sup> in fighting corruption?", "How about the propaganda of law-based governance?", etc. The final score for this indicator is equal to the sum of the scores for responses to each question. We add the interaction term of the rule of law and the degree of satisfaction, LAWGOV×SATISFY, in Equation (1). The estimation result is displayed in Table 8.

Column (12) in Table 8 shows that the coefficient of the interaction term is significantly positive. We also drop the variable LAWGOV from the regressions to eliminate the possible collinearity between it and the interaction term, finding that the estimate of the interaction term is still significantly positive in column (13) of Table 8. This finding implies that, if the public has high satisfaction with the quality of the law aspect of governance, then the correlation between the rule of law and housing prices would be greater. Therefore, hypothesis 2 is supported.


**Table 8.** Sensitivity and heterogeneity of the relationship between law-based governance and housing prices.

Note: \*, \*\*, and \*\*\* indicate statistical significance at the 10%, 5%, and 1% levels, respectively. Standard errors are in parentheses. The control variables are the same as in Table 3.
