During 1992–2007, house price growth was strongly correlated with local entrepreneurship. In this study, the researchers show with Census Bureau data that most of this entry was related to construction and real estate; these entrants tend to be small and short-lived.
Using a 1998 Texas reform that allowed home equity lending for the first time in the state, they isolated that entrepreneurship through the collateral channel tends to be longer-lived and more balanced across sectors. The collateral channel is a tenth or less of the entry associated with house price increases, driven by a small share of homeowners who are constrained without price growth.
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