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House prices, collateral, and self-employment

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  • Adelino, Manuel
  • Schoar, Antoinette
  • Severino, Felipe

Abstract

We show the importance of the collateral lending channel for small business employment over the past decade. Small businesses in areas with greater increases in house prices experienced stronger growth in employment than large firms in the same areas and industries. To identify the role of the collateral lending channel separately from aggregate changes in demand, we show that this effect is more pronounced in industries that need little start-up capital and in which housing collateral is more important. This increase is also present in manufacturing industries, particularly those that ship goods over long distances. In aggregate, the collateral lending channel explains 15–25% of employment variation.

Suggested Citation

  • Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2015. "House prices, collateral, and self-employment," Journal of Financial Economics, Elsevier, vol. 117(2), pages 288-306.
  • Handle: RePEc:eee:jfinec:v:117:y:2015:i:2:p:288-306
    DOI: 10.1016/j.jfineco.2015.03.005
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    More about this item

    Keywords

    Housing; Collateral; Self-employment; Entrepreneurship; Small business;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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