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House prices, home equity and entrepreneurships

Author

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  • Popov, Alexander
  • Corradin, Stefano

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 dataset 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. JEL Classification: G21, L26

Suggested Citation

  • Popov, Alexander & Corradin, Stefano, 2013. "House prices, home equity and entrepreneurships," Working Paper Series 1544, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20131544
    Note: 861282
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1544.pdf
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    References listed on IDEAS

    as
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    17. repec:hal:spmain:info:hdl:2441/75koqefued8i7pihbrl9u84p4u is not listed on IDEAS
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    Cited by:

    1. Vítor Constâncio & Philipp Hartmann & Oreste Tristani, 2015. "Inflation and unemployment in Europe – insights from the ECB’s 2015 Sintra Forum," Research Bulletin, European Central Bank, vol. 23, pages 1-8.
    2. Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2015. "House prices, collateral, and self-employment," Journal of Financial Economics, Elsevier, vol. 117(2), pages 288-306.
    3. Philippe Andrade, 2015. "The heterogeneous interpretation of forward guidance," Research Bulletin, European Central Bank, vol. 23, pages 9-14.
    4. Taejun Lim, 2018. "Housing as Collateral, Financial Constraints, and Small Businesses," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 68-85, October.
    5. Joan Paredes, 2015. "Shall we trust governments' fiscal plans?," Research Bulletin, European Central Bank, vol. 23, pages 15-18.

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    More about this item

    Keywords

    collateral channel; entrepreneurship; home ownership;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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