This paper examines the impact of changes in housing affordability on regional entrepreneurship. Two-way fixed-effects estimates suggest an increase in the level of house prices in a commuting zone results in a decline in establishment openings as a share of existing establishments—consistent with a crowding-out effect. In contrast, an increase in the growth rate of house prices results in a small (although not always statistically significant) increase in establishment openings—consistent with a positive wealth effect from capital gains. To address endogeneity concerns, the authors adopt two alternative instruments for commuting zone house-price growth: a measure of local real estate lending and a geography-based measure of the elasticity of local housing supply. They extend the analysis using restricted-use establishment-level microdata from the Quarterly Census of Employment and Wages (QCEW) for the state of Colorado. Results from the QCEW data are consistent with those from the commuting zone sample.
AcsZ. J.ArmingtonC. (2006). Entrepreneurship, geography, and American economic growth. Cambridge University Press.
2.
AcsZ. J.AudretschD. B.LehmannE. E. (2013). The knowledge spillover theory of entrepreneurship. Small Business Economics, 4, 757–774. https://doi.org/10.1007/s11187-013-9505-9
3.
AcsZ. J.AudretschD. B.PontusB.CarlssonB. (2010). The missing link: The knowledge filter and entrepreneurship in endogenous growth. Small Business Economics, 32(1), 15–30. https://doi.org/10.1007/s11187-008-9157-3
4.
AcsZ. J.BraunerhjelmP.AudretschD. B.CarlssonB. (2009). The knowledge spillover theory of entrepreneurship. Small Business Economics, 32(1), 15–30. https://doi.org/10.1007/s11187-008-9157-3
5.
AlonsoW. (1964). Location and land use: Toward a general theory of land rent. Harvard University Press.
AudretschD.KeilbachM.LehmannE. (2006). Entrepreneurship and economic growth. Oxford University Press.
8.
AutorD.DornD. (2013). The growth of low-skill service jobs and the polarization of the US labor market. American Economic Review, 103(5), 1553–1597. https://doi.org/10.1257/aer.103.5.1553
9.
BartikT. (1991). Who benefits from state and local economic development policies. W.E. Upjohn Institute for Employment Research.
10.
BartikT. (2019). Making sense of incentives: Taming business incentives to promote prosperity. W.E. Upjohn Institute for Employment Research.
11.
BaumolW. J.StromR. J. (2008). Entrepreneurship and economic growth. Strategic Entrepreneurship Journal, 1(3-4), 233–237. https://doi.org/10.1002/sej.26
12.
BuntenD.WeilerS.ThompsonE.ZahranS. (2015). Entrepreneurship, information, and growth. Journal of Regional Sciences, 55(4), 560–584. https://doi.org/10.1111/jors.12157
13.
ChaneyT.SraerD.ThesmarD. (2012). The collateral channel: How real estate shocks affect corporate investment. American Economic Review, 102(6), 2381–2409. https://doi.org/10.1257/aer.102.6.2381
14.
ChappleK.ThomasJ. V.BelzarD.AutlerG. (2010). Fueling the fire: Information technology and housing price appreciation in the San Francisco Bay Area and the twin cities. Housing Policy Debate, 15(2), 347–383. https://doi.org/10.1080/10511482.2004.9521505
15.
DesmondM. (2018). Heavy is the house: Rent burden among the American urban poor. International Journal of Urban and Regional Research, 42(1), 160–170. https://doi.org/10.1111/1468-2427.12529
16.
DiamondR.McQuadeT. (2019). Who wants affordable housing in their backyard? An equilibrium analysis of low-income property development. Journal of Political Economy, 127(3), 1063–1117. https://doi.org/10.1086/701354
17.
EvansD.JovanovicB. (1989). An estimated model of entrepreneurial choice under liquidity constraints. Journal of Political Economy, 97(4), 808–827. https://doi.org/10.1086/261629
18.
FischelW. (2001). The homevoter hypothesis: How home values influence local government taxation, school finance, and land-use policies. Harvard University Press.
19.
FritschM.WyrwichM. (2019). Regional trajectories of entrepreneurship, knowledge, and growth: The role of history and culture. Springer.
GlaeserE.GyourkoJ. (2018). The economic implications of housing supply. Journal of Economic Perspectives, 32(1), 3–30. https://doi.org/10.1257/jep.32.1.3
22.
GraitsonD. (1982). Spatial competition à la hotelling: A selective survey. Journal of Industrial Economics, 31(1/2), 11–25. https://doi.org/10.2307/2098001
23.
HardingJ.RosenthalS. (2017). Homeownership, housing capital gains, and self employment. Journal of Urban Economics, 99, 120–135. https://doi.org/10.1016/j.jue.2016.12.005
24.
Harper-AndersonE.LewisD. (2017). What makes business incubation work? Measuring the influence of incubator quality and regional capacity on incubator outcomes. Economic Development Quarterly, 32(1), 60–77. https://doi.org/10.1177/0891242417741961
25.
HilberC.Robert-NicoudF. (2013). On the origins of land-use regulations: Theory and evidence from US metro areas. Journal of Urban Economics, 75, 29–43. https://doi.org/10.1016/j.jue.2012.10.002
HsiehC.MorettiE. (2019). Housing constraints and spatial misallocation. American Economic Journal: Macroeconomics, 11(2), 1–39. https://doi.org/10.1257/mac.20170388
28.
JacobsJ. (1969). The economy of cities. Random House.
29.
Joe Biden for President: Official Campaign Website (2020). The Biden plan for investing in our communities through housing. https://joebiden.com/housing/
LeeY. S. (2017). Entrepreneurship, small businesses, and growth in cities. Journal of Economic Geography, 17(2), 311–343. https://doi.org/10.1093/jeg/lbw021
32.
LensM. C.MonkkonenP. (2015). Do strict land use regulations make metropolitan areas more segregated by income?Journal of the American Planning Association, 82(1), 106–112. https://doi.org/10.1080/01944363.2015.1111163
33.
MadalenoM.MaxN.OvermanH.WaightsS. (2018). Incubators, accelerators, and regional economic development. IZA Discussion Paper Series 11856.
34.
ManjooF. (2019, May 22). America’s cities are unlivable. Blame wealthy liberals. New York Times.
35.
MeltzerR. (2016). Gentrification and small business: Threat or opportunity?Cityscape: A Journal of Policy Development and Research, 18(3), 57–85.
36.
MeltzerR.CapperisS. (2017). Neighborhood differences in retail turnover: Evidence from New York. Urban Studies, 54(13), 3022–3057. https://doi.org/10.1177/0042098016661268
37.
MianA.SufiA. (2009). The consequences of mortgage credit expansion: Evidence from the U.S. mortgage default crisis. Quarterly Journal of Economics, 124(4), 1449–1496. https://doi.org/10.1162/qjec.2009.124.4.1449
38.
MianA.SufiA. (2010). Household leverage and the recession of 2007 to 2009. IMF Economic Review, 58(1), 74–117. https://doi.org/10.1057/imfer.2010.2
39.
MianA.SufiA. (2011). House prices, home equity-based borrowing, and the U.S. household leverage crisis. American Economic Review, 101(5), 2132–2156. https://doi.org/10.1257/aer.101.5.2132
40.
Ortalo-MagneF.PratA. (2014). On the political economy of urban growth: Homeownership versus affordability. American Economic Journal: Microeconomics, 6(1), 154–181. https://doi.org/10.1257/mic.6.1.154
41.
QuigleyJ. M.RosenthalL. A. (2005). The effects of land use regulation on the price of housing: What do we know? What can we learn?Cityscape, 8(1), 69–137.
42.
RothsteinR. (2017). The color of law: A forgotten history of how our government segregated America. Liveright.
43.
RugglesS.FloodS.GoekenR.GroverJ.MeyerE.PacasJ.SobekM. (2019). IPUMS USA: Version 9.0 [dataset]. IPUMS. https://doi.org/10.18128/D010.V9.0
SaksR. E. (2008). Job creation and housing construction: Constraints on metropolitan area employment growth. Journal of Urban Economics, 64(1), 178–195. https://doi.org/10.1016/j.jue.2007.12.003
46.
SchmalzM.SraerD.ThesmarD. (2017). Housing collateral and entrepreneurship. Journal of Finance, 72(1), 99–132. https://doi.org/10.1111/jofi.12468
47.
SchuetzJ. (2019). Housing affordability and quality create stress for heartland families. The Brookings Institute.
48.
SchuetzJ.KolkoJ.MeltzerR. (2012). Are poor neighborhoods ‘retail deserts?’ USC Lusk Center for Real Estate Research Brief.
49.
SchumpeterJ. A. (1942). Capitalism, socialism, and democracy. Harper & Row.
