House Prices, Home Equity and Entrepreneurships

44 Pages Posted: 19 Jun 2013

See all articles by Stefano Corradin

Stefano Corradin

European Central Bank (ECB)

Alexander A. Popov

European Central Bank (ECB)

Date Written: May 2, 2013

Abstract

How does home ownership affect new business creation? We develop a model of career choice in the presence of liquidity constraints in which shocks to the value of real estate affect the propensity of potential entrepreneurs to borrow against the value of their property. Using a large US individual-level survey data set over the 1996-2006 period, we show that a 10% increase in home equity raises the probability of transition into entrepreneurship by up to 14%. Our results persist when we use the topological elasticity of housing supply to generate variation in home equity that is orthogonal to entrepreneurial choice.

Keywords: Home ownership, collateral channel, entrepreneurship

JEL Classification: G21, L26

Suggested Citation

Corradin, Stefano and Popov, Alexander A., House Prices, Home Equity and Entrepreneurships (May 2, 2013). ECB Working Paper No. 1544, Available at SSRN: https://ssrn.com/abstract=2259538 or http://dx.doi.org/10.2139/ssrn.2259538

Stefano Corradin (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Alexander A. Popov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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