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House Prices, Collateral and Self-Employment

Author

Listed:
  • Manuel Adelino
  • Antoinette Schoar
  • Felipe Severino
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

  • Manuel Adelino & Antoinette Schoar & Felipe Severino, 2013. "House Prices, Collateral and Self-Employment," NBER Working Papers 18868, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18868
    Note: CF EFG LS
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G01 - Financial Economics - - General - - - Financial Crises
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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