House Prices, Home Equity and Entrepreneurship: Evidence from U.S. Census Micro Data / Sari Kerr, William R. Kerr, Ramana Nanda.

By:

Kerr, Sari

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w21458.Publication details: Cambridge, Mass. National Bureau of Economic Research 2015.Description: 1 online resource: illustrations (black and white)Subject(s):

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: We use Census micro data to shed new light on how growth in house prices boosts US entrepreneurship. At the height of the 2007 real estate boom, 5% of self-employed individuals and 12% of employer-businesses used home equity to partly or wholly finance a new business. Despite this frequency, several analyses suggest that little of the observed city-level relationship between house price increases and entrepreneurship operates through expansion of the home equity collateral channel. First, home equity gains mostly appear to substitute against loans from friends and family. The vast majority of entrepreneurs used personal savings to finance their business, and these individuals usually hold sufficient start-up capital absent the house price increases. Second, we estimate that over 90% of the relationship between house price increases and entrepreneurship observed in city-level analyses comes from higher local demand that boosts entry. Our results provide a nuanced picture: while housing collateral is important for some entrepreneurs to access needed credit, the empirical relationship between house price increases and start-up activity is more about local demand than about financing constraints.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w21458 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

Collection: Colección NBER Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	nber w21455 Technology Entry in the Presence of Patent Thickets /	nber w21456 External and Public Debt Crises /	nber w21457 Sustaining Cooperation: Community Enforcement vs. Specialized Enforcement /	nber w21458 House Prices, Home Equity and Entrepreneurship: Evidence from U.S. Census Micro Data /	nber w21459 From Local to Global: External Validity in a Fertility Natural Experiment /	nber w2146 Supply Shocks in Macroeconomics /	nber w21460 Long Run Trends in Unemployment and Labor Force Participation in China /	Next

August 2015.

We use Census micro data to shed new light on how growth in house prices boosts US entrepreneurship. At the height of the 2007 real estate boom, 5% of self-employed individuals and 12% of employer-businesses used home equity to partly or wholly finance a new business. Despite this frequency, several analyses suggest that little of the observed city-level relationship between house price increases and entrepreneurship operates through expansion of the home equity collateral channel. First, home equity gains mostly appear to substitute against loans from friends and family. The vast majority of entrepreneurs used personal savings to finance their business, and these individuals usually hold sufficient start-up capital absent the house price increases. Second, we estimate that over 90% of the relationship between house price increases and entrepreneurship observed in city-level analyses comes from higher local demand that boosts entry. Our results provide a nuanced picture: while housing collateral is important for some entrepreneurs to access needed credit, the empirical relationship between house price increases and start-up activity is more about local demand than about financing constraints.