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Home Ownership and Home Equity Promote Entrepreneurial Activity

Author

Listed:
  • Hassink, Wolter

    (Utrecht University)

  • Millone, Matteo

    (De Nederlandsche Bank)

  • Mocking, Remco

    (Dutch Ministry of Finance)

  • Vogt, Benedikt

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This paper studies the effects of private real estate collateral on entrepreneurial lending and entrepreneurial activity in the Netherlands. The residential collateral channel is especially relevant for sole-proprietors who own a business with unlimited liability. We used administrative data on outstanding bank credit based on all Dutch sole-proprietorships in the 2007-2013 period. Our results indicate that, during a severe economic crisis, home-owning entrepreneurs are affected less severely than renting entrepreneurs. Home ownership improved access to credit at the extensive and intensive margin, and it reduced the probability of exit. Positive home equity is the driving force behind this effect, as entrepreneurs with negative home equity are not treated significantly differently from renters.

Suggested Citation

  • Hassink, Wolter & Millone, Matteo & Mocking, Remco & Vogt, Benedikt, 2021. "Home Ownership and Home Equity Promote Entrepreneurial Activity," IZA Discussion Papers 14170, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14170
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    References listed on IDEAS

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    More about this item

    Keywords

    collateral lending channel; house price shocks; negative home equity; entrepreneurial lending;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • 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

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