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House Prices, Home Equity Borrowing, and Entrepreneurship

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  • Stefano Corradin
  • Alexander Popov

Abstract

This paper shows that housing wealth helps alleviate credit constraints for potential entrepreneurs by enabling home owners to extract equity from their property and invest it in their business. Using a large U.S. individual-level survey dataset for the 1996–2006 period, we find that a 10% increase in home equity raises the share of individuals who transition into self-employment each year from 1% to 1.07%. Our results persist when we use proxies for aggregate housing demand shocks and for the topological elasticity of housing supply to generate variation in home equity that is orthogonal to entrepreneurial choice.

Suggested Citation

  • Stefano Corradin & Alexander Popov, 2015. "House Prices, Home Equity Borrowing, and Entrepreneurship," Review of Financial Studies, Society for Financial Studies, vol. 28(8), pages 2399-2428.
  • Handle: RePEc:oup:rfinst:v:28:y:2015:i:8:p:2399-2428.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhv020
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    Cited by:

    1. van Praag, Mirjam C. & Raknerud, Arvid, 2017. "The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data," IZA Discussion Papers 11018, Institute for the Study of Labor (IZA).
    2. Bracke, Philippe & Hilber, Christian A.L. & Silva, Olmo, 2018. "Mortgage debt and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 103(C), pages 52-66.
    3. Wang, Ren & Hou, Jie & He, Xiaobei, 2017. "Real estate price and heterogeneous investment behavior in China," Economic Modelling, Elsevier, vol. 60(C), pages 271-280.
    4. Luc Laeven & Alexander Popov, 2016. "A Lost Generation? Education Decisions and Employment Outcomes during the US Housing Boom-Bust Cycle of the 2000s," American Economic Review, American Economic Association, vol. 106(5), pages 630-635, May.
    5. Popov, Alexander, 2017. "Evidence on finance and economic growth," Working Paper Series 2115, European Central Bank.
    6. Li, Jieying & Zhang, Xin, 2017. "House Prices, Home Equity, and Personal Debt Composition," Working Paper Series 343, Sveriges Riksbank (Central Bank of Sweden).
    7. repec:eee:juecon:v:99:y:2017:i:c:p:120-135 is not listed on IDEAS

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