Working Paper: NBER ID: w21458
Authors: Sari Kerr; William R. Kerr; Ramana Nanda
Abstract: During 1992-2007, house price growth is strongly correlated with local entrepreneurship. We show with Census Bureau data that most of this entry is related to construction and real estate; these entrants tend to be small and short-lived. Using a 1998 Texas reform that allowed home equity lending for the first time in the state, we isolate that entrepreneurship through the collateral channel tends to be longer-lived and more balanced across sectors. The collateral channel is a tenth or less of the entry associated with house price increases, driven by a small share of homeowners who are constrained without price growth.
Keywords: house prices; home equity; entrepreneurship; Texas reform
JEL Codes: E44; G21; L26; M13; R12; R31; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| house price growth during 1992-2007 (R31) | local entrepreneurship (L26) |
| house price growth during 1992-2007 (R31) | new business entries in construction and real estate sectors (L74) |
| introduction of home equity lending in Texas in 1998 (G51) | longer-lived entrepreneurship (L26) |
| introduction of home equity lending in Texas in 1998 (G51) | more balanced entrepreneurship across sectors (L26) |
| house price increases (R31) | entry associated with house price increases (R31) |
| collateral channel (G29) | overall entrepreneurship growth (L26) |