Same Shock, Separate Channels: House Prices and Firm Performance in the Great Recession

G. Jacob Blackwood

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

Abstract: Combining confidential business-level microdata with housing and banking data, I document large and persistent effects of local house prices on employment at small businesses, and particularly young businesses, during the Great Recession. I show that the effect on entry is important for explaining the disproportionate effect on young businesses, while young firm exit is also disproportionately affected. I then explore the channels through which house prices affect business outcomes. I use survey data to show that reliance on either personal assets or home equity is associated with increased sensitivity to house prices. I then use local bank balance sheet information to show both young and old firms are sensitive to local credit shocks, with some evidence of a larger effect on young businesses. I develop a macroeconomic model that is consistent with these findings where house prices work through two channels: a bank credit supply channel and a housing collateral channel.

Keywords: Firm Dynamics; House Prices; Credit Supply; Business Cycles (search for similar items in EconPapers)
JEL-codes: D22 D25 E44 R31 (search for similar items in EconPapers)
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https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-03.pdf First version, 2026 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:26-03

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