Dynamism Diminished: The Role of Housing Markets and Credit Conditions

Steven Davis and John Haltiwanger

American Economic Journal: Macroeconomics, 2024, vol. 16, issue 2, 29-61

Abstract: We estimate the effects of house price changes on young-firm employment shares and industry-level employment growth in local economies. A novel test shows that house price effects on local economies work through wealth, liquidity, and collateral effects on the propensity to start new firms and expand young ones. Aggregating local effects to the national level, our estimates imply that housing market ups and downs play a major role—as transmission channel and driving force—in medium-run fluctuations in young-firm employment shares in recent decades. We also find a distinct and smaller role for locally exogenous loan-supply shifts.

JEL-codes: D22 E24 E32 G21 L25 R11 R31 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Dynamism Diminished: The Role of Housing Markets and Credit Conditions (2019)
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DOI: 10.1257/mac.20190007

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