House Price, the Supply of Collateral and the Enterprise Economy

Jane Black, David de Meza and David Jeffreys

Economic Journal, 1996, vol. 106, issue 434, pages 60-75

Abstract: This paper investigates the extent to which the supply of collateral affects business formation in the United Kingdom. Bank loans are typically secured on the entrepreneur's house. Using a variety of data and formulations, evidence is found that a 10 percent rise in the value of unreleased net housing equity increases the number of new VAT registrations by some 5 percent. Since the authors find that businesses formed in response to increases in the value of housing assets seem to be of at least average quality as measured by survival chances, there appears to be a large pool of untapped entrepreneurial talent. Copyright 1996 by Royal Economic Society.

Date: 1996
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