Boon or Burden? Evaluating the Competing Effects of House-Price Shocks on Regional Entrepreneurship

Nicholas Kacher and Luke Petach

Economic Development Quarterly, 2021, vol. 35, issue 4, 287-304

Abstract: This paper examines the impact of changes in housing affordability on regional entrepreneurship. Two-way fixed-effects estimates suggest an increase in the level of house prices in a commuting zone results in a decline in establishment openings as a share of existing establishments—consistent with a crowding-out effect. In contrast, an increase in the growth rate of house prices results in a small (although not always statistically significant) increase in establishment openings—consistent with a positive wealth effect from capital gains. To address endogeneity concerns, the authors adopt two alternative instruments for commuting zone house-price growth: a measure of local real estate lending and a geography-based measure of the elasticity of local housing supply. They extend the analysis using restricted-use establishment-level microdata from the Quarterly Census of Employment and Wages (QCEW) for the state of Colorado. Results from the QCEW data are consistent with those from the commuting zone sample.

Keywords: housing affordability; entrepreneurship; business dynamism; regional economic development (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/08912424211041084 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:ecdequ:v:35:y:2021:i:4:p:287-304

DOI: 10.1177/08912424211041084

Access Statistics for this article

More articles in Economic Development Quarterly
Bibliographic data for series maintained by SAGE Publications ().