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Home equity lending, credit constraints and small business in the US

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Listed:
  • William D. Lastrapes
  • Ian Schmutte
  • Thor Watson

Abstract

We use Texas's constitutional amendment in 1997 that expanded the scope of home equity loans as a source of exogenous variation to estimate the effects of relaxing credit constraints on small businesses. We find, using standard panel data methods and restricted‐use microdata from the US Census Bureau, that the Texas amendment increased the use of home equity finance by small businesses, increased new business and job creation and reduced firm exit and job loss. The effects are larger and significant for businesses with fewer than 10 employees.

Suggested Citation

  • William D. Lastrapes & Ian Schmutte & Thor Watson, 2022. "Home equity lending, credit constraints and small business in the US," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 43-63, January.
    • Handle: RePEc:bla:ecinqu:v:60:y:2022:i:1:p:43-63
    DOI: 10.1111/ecin.13026
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    More about this item

    JEL classification:

    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • E0 - Macroeconomics and Monetary Economics - - General

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