Externalities of home-ownership on entrepreneurship: empirical evidence

Externalities of home-ownership on entrepreneurship: empirical evidence PurposeThis study aims to examine the externalities from regional home-ownership to individual-level entrepreneurship.Design/methodology/approachThe paper links individual-level data from the Finnish Income Distribution Statistics for years 1990-1992 to regional home-ownership proportions. Probit models of entrepreneurship with regional home-ownership and appropriate control variables as regressors are estimated. A rental housing market deregulation experiment which caused exogenous variation in regions’ home-ownership is exploited to identify the causal effects on entrepreneurship.FindingsResults show that higher home-ownership in a region leads to greater entrepreneurship. Further analyses together with the fact that homeownership tends to have detrimental labour market effects suggest that homeownership encourages entrepreneurship by leading to less paid work opportunities. These results are in line with those of earlier literature that self-employment and entrepreneurship, especially during bad economic times, are partly motivated by bad employment opportunities.Originality/valueThis study presents novel results on the externalities that home-ownership has on entrepreneurship. These externalities are shown to be important enough that they need to be considered when assessing the economic effects of various policies that affect the prevalence of owner-occupied housing. The instrumental variables’ estimates are the first causal estimates in the literature and the bias resulting from assuming exogeneity is shown to be nonnegligible. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Housing Markets and Analysis Emerald Publishing

Externalities of home-ownership on entrepreneurship: empirical evidence

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-8270
DOI
10.1108/IJHMA-01-2018-0008
Publisher site
See Article on Publisher Site

Abstract

PurposeThis study aims to examine the externalities from regional home-ownership to individual-level entrepreneurship.Design/methodology/approachThe paper links individual-level data from the Finnish Income Distribution Statistics for years 1990-1992 to regional home-ownership proportions. Probit models of entrepreneurship with regional home-ownership and appropriate control variables as regressors are estimated. A rental housing market deregulation experiment which caused exogenous variation in regions’ home-ownership is exploited to identify the causal effects on entrepreneurship.FindingsResults show that higher home-ownership in a region leads to greater entrepreneurship. Further analyses together with the fact that homeownership tends to have detrimental labour market effects suggest that homeownership encourages entrepreneurship by leading to less paid work opportunities. These results are in line with those of earlier literature that self-employment and entrepreneurship, especially during bad economic times, are partly motivated by bad employment opportunities.Originality/valueThis study presents novel results on the externalities that home-ownership has on entrepreneurship. These externalities are shown to be important enough that they need to be considered when assessing the economic effects of various policies that affect the prevalence of owner-occupied housing. The instrumental variables’ estimates are the first causal estimates in the literature and the bias resulting from assuming exogeneity is shown to be nonnegligible.

Journal

International Journal of Housing Markets and AnalysisEmerald Publishing

Published: Feb 4, 2019

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