Kerr, Sari. <br/><br/>
House Prices, Home Equity and Entrepreneurship:  Evidence from U.S. Census Micro Data / 
Sari Kerr, William R. Kerr, Ramana Nanda. 
 - Cambridge, Mass.  National Bureau of Economic Research  2015. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w21458 .
 - Working Paper Series (National Bureau of Economic Research)  no. w21458. .
<br/><br/> August 2015. 
<br/><br/> 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. 
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