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SERC/Urban and Spatial Programme Discussion Paper

Homeownerhip and Entrepreneurship

We study the link between homeownership and entrepreneurship by exploiting the longitudinal dimension of the British Household Panel Survey (BHPS) and constructing a detailed monthly-spell dataset that tracks individuals? job history and tenure choice, coupled with other time-varying characteristics. Our fixed-effects estimates show that purchasing a house reduces the likelihood of starting a business by 20-25%. This result is driven by homeowners with mortgages and persists for several years after entering homeownership. The negative link can be rationalized by portfolio considerations: leveraged housing investments crowd out entrepreneurial investments. Alternative explanations based on credit constraints find little support in our data.

Philippe Bracke, Christian Hilber and Olmo Silva

24 April 2012     Paper Number SERCDP0103

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This SERC/Urban and Spatial Programme Discussion Paper is published under the centre's Urban programme.