The reasons that younger homeowners are less likely to become entrepreneurs: The role of capital constraints

Mingzhi Hu and Xiaoshuang Li
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Xiaoshuang Li: Institute of Industrial Internet and Internet of Things, China Academy of Information and Communications Technology, Wuhan, China

Journal of Regional Economics, 2022, vol. 1, issue 1, 68-82

Abstract: Considering that housing is the single biggest asset for most households, owning a home may create barriers to entrepreneurship for young people who generally accumulate relatively little wealth due to a short-term career and low income. Using longitudinal data from the China Family Panel Studies (CFPS) survey, our empirical work suggests that homeowners are associated with significantly less propensity for entrepreneurial engagement and the negative homeownership effect on entrepreneurship is much larger for younger homeowners. These findings are robust to omitted variable bias, reverse causality and model misspecification. We explore the mechanism through which capital constraints related to housing purchase may more affect younger homeowners from starting entrepreneurial activities. We find strong supportive evidence for this mechanism.

Keywords: Homeownership; Age; Entrepreneurship; Capital constraint (search for similar items in EconPapers)
Date: 2022
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