Homeownership and Entrepreneurship: The Role of Commitment and Mortgage Debt

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 7417

Classification and Topics

• Classification: Wirtschaft ; Entrepreneurship ; Household Saving; Personal Finance ; Portfolio Choice; Investment Decisions ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
• Subject: entrepreneurship ; homeownership ; commitment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bracke, Philippe ; Hilber, Christian ; Silva, Olmo
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/80679
• Last update: 10.03.2025, 11:42 AM CET