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Same Shock, Separate Channels: House Prices and Firm Performance in the Great Recession

Author

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  • G. Jacob Blackwood

Abstract

Combining confidential business-level microdata with housing and banking data, I document large and persistent effects of local house prices on employment at small businesses, and particularly young businesses, during the Great Recession. I show that the effect on entry is important for explaining the disproportionate effect on young businesses, while young firm exit is also disproportionately affected. I then explore the channels through which house prices affect business outcomes. I use survey data to show that reliance on either personal assets or home equity is associated with increased sensitivity to house prices. I then use local bank balance sheet information to show both young and old firms are sensitive to local credit shocks, with some evidence of a larger effect on young businesses. I develop a macroeconomic model that is consistent with these findings where house prices work through two channels: a bank credit supply channel and a housing collateral channel.

Suggested Citation

  • G. Jacob Blackwood, 2026. "Same Shock, Separate Channels: House Prices and Firm Performance in the Great Recession," Working Papers 26-03, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:26-03
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    File URL: https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-03.pdf
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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • 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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