House Prices, Collateral and Self-Employment
44 Pages Posted: 9 Mar 2013 Last revised: 21 Jan 2022
Date Written: March 2013
Abstract
This paper documents the role of the collateral lending channel to facilitate small business starts and self-employment in the period before the financial crisis of 2008. We document that between 2002 and 2007 areas with a bigger run up in house prices experienced a strong increase in employment in small businesses compared to employment in large firms in the same industries. This increase in small business employment was particularly pronounced in (1) industries that need little startup capital and can thus more easily be financed out of increases in housing as collateral; (2) manufacturing industries where goods are shipped over long distances, which rules out that local demand is driving the expansion. We show that this effect is separate from an aggregate demand channel that relies on home equity based borrowing leading to increased demand and employment creation.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Paper statistics
Recommended Papers
-
The Capital Structure Decisions of New Firms
By Alicia Robb and David T. Robinson
-
The Capital Structure Decisions of New Firms
By Alicia Robb and David T. Robinson
-
Liquidity Constraints, Household Wealth, and Entrepreneurship Revisited
-
Liquidity Constraints, Household Wealth, and Entrepreneurship Revisited
-
Liquidity Constraints, Household Wealth, and Entrepreneurship Revisited
-
The First Deal: The Division of Founder Equity in New Ventures
By Thomas F. Hellmann and Noam Wasserman
-
Credit Cards, Race and Entrepreneurship
By Aaron Chatterji and Robert Seamans
-
Did the Crisis Induce Credit Rationing for French SMEs?
By Elisabeth Kremp and Patrick Sevestre
-
The Role of Credit Cards in Providing Financing for Small Businesses
-
By Patrick Bajari, Jane Cooley, ...