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Home Equity Lending, Credit Constraints and Small Business in the US

William Lastrapes (), Ian Schmutte and Thor Watson

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: We use Texas's constitutional amendment in 1997 that expanded the scope of home equity loans as a source of exogenous variation to estimate the effects of relaxing credit constraints on small businesses. We find, using standard panel data methods and restricted-use microdata from the US Census Bureau, that the Texas amendment increased the use of home equity finance by small businesses, increased new business and job creation and reduced establishment exit and job loss. The effects are larger and significant for businesses with fewer than ten employees.

Keywords: natural experiment; Texas; entrepreneur; difference-in-differences (search for similar items in EconPapers)
JEL-codes: E0 M13 M2 R0 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-10
New Economics Papers: this item is included in nep-ent, nep-fdg, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc

Downloads: (external link) First version, 2020 (application/pdf)

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Journal Article: Home equity lending, credit constraints and small business in the US (2022) Downloads
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