The Collateral Channel: Dynamic Effects of Housing Market on Entrepreneurship

by Seungjoon Oh, Jaeyoon Lee*, Bong-Geun Choi

ARTICLE | Economics Letters | Vol.198, 2021

Abstract

This paper examines whether and how housing market prices affect entrepreneurship activities. To this end, we empirically test the hypothetical collateral channel, exploiting a large-scale household-level survey from China. We find that a higher growth rate of house prices is associated with a higher propensity of being self-employed of a family member. We further find that lower house price volatility and higher liquidity in the real estate market boost entrepreneurial choices by households. Overall, the results provide favorable empirical evidence for the collateral channel.

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