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Homeownership and Entrepreneurship: The Role of Commitment and Mortgage Debt

Philippe Bracke, Christian Hilber () and Olmo Silva ()

No 7417, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the link between homeownership and entrepreneurship using a model of occupational choice and housing tenure where homeowners commit a fixed budget to mortgage payments. Our model predicts that: (i) mortgage commitments, by amplifying risk aversion, diminish the likelihood that homeowners start a business; (ii) the negative link between homeownership and entrepreneurship is increasing in mortgage debt; and (iii) the negative relation is more pronounced for entrepreneurs in risky sectors. Exploiting the longitudinal dimension of the British Household Panel Survey to control for unobservables, we test and confirm these predictions. Leveraged home-buyers are 30% less likely to become entrepreneurs.

Keywords: entrepreneurship; homeownership; commitment (search for similar items in EconPapers)
JEL-codes: D14 G11 L26 R21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2013-05
New Economics Papers: this item is included in nep-bec, nep-ent and nep-ure
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Forthcoming - heavily revised version forthcoming in the Journal of Urban Economics

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Working Paper: Homeownerhip and Entrepreneurship (2012) Downloads
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