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The collateral channel: Dynamic effects of housing market on entrepreneurship

Author

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  • Oh, Seungjoon
  • Lee, Jaeyoon
  • Choi, Bong-Geun

Abstract

This paper examines whether and how housing market prices affect entrepreneurship activities. To this end, we empirically test the hypothetical collateral channel, exploiting a large-scale household-level survey from China. We find that a higher growth rate of house prices is associated with a higher propensity of being self-employed of a family member. We further find that lower house price volatility and higher liquidity in the real estate market boost entrepreneurial choices by households. Overall, the results provide favorable empirical evidence for the collateral channel.

Suggested Citation

  • Oh, Seungjoon & Lee, Jaeyoon & Choi, Bong-Geun, 2021. "The collateral channel: Dynamic effects of housing market on entrepreneurship," Economics Letters, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304213
    DOI: 10.1016/j.econlet.2020.109661
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    References listed on IDEAS

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    1. Liang Han & Stuart Fraser & David J. Storey, 2009. "The Role of Collateral in Entrepreneurial Finance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(3-4), pages 424-455.
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    Cited by:

    1. Yu, Liangliang & Cai, Yinying, 2021. "Do rising housing prices restrict urban innovation vitality? Evidence from 288 cities in China," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 276-288.
    2. Jinsi Liu & Hu Xiang & Shengjiao Zhu & Shixiang Chen, 2024. "Spatial heterogeneity analysis of biased land resource supply policies on housing prices and innovation efficiency," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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    More about this item

    Keywords

    Entrepreneurship; Housing market; Collateral channel; Housing liquidity; Housing price volatility;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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