Szumilo, N. and Vanino, E. orcid.org/0000-0002-4740-1501 (2021) Mortgage affordability and entrepreneurship: Evidence from spatial discontinuity in Help-to-Buy equity loans. Journal of Business Venturing, 36 (4). 106105. ISSN 0883-9026
Abstract
We exploit a policy change in the UK Help-to-Buy (HTB) equity loan scheme in order to identify the causal link between mortgage affordability and entrepreneurship activity at the local level. We contribute to the literature on the relationship between housing finance and entrepreneurship by demonstrating the impact of government equity loans on entrepreneurship through the release of trapped liquidity. When less equity is required to buy a house, households could use the ‘additional’ liquidity to start a business. We use a spatial discontinuity in treatment methodology to take advantage of the reform of the Help-to-Buy scheme in 2016, which increased the limit of equity loans provided in London. By using data on business population at the postcode sector level, we are able to measure the impact of the new policy by comparing similar areas on the opposite sides of the Greater London Authority boundary. Our results show that an increase in mortgage affordability fosters entrepreneurial activity in affected areas by 20%, resulting in 1 more start-up on average per postcode per year. The new businesses are mainly single-plant micro enterprises in capital intensive sectors with low income volatility.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2021 Elsevier Inc. This is an author produced version of a paper subsequently published in Journal of Business Venturing. Uploaded in accordance with the publisher's self-archiving policy. Article available under the terms of the CC-BY-NC-ND licence (https://creativecommons.org/licenses/by-nc-nd/4.0/). |
Keywords: | Entrepreneurship; Home-ownership; Help-to-buy; Home equity; Trapped liquidity |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 16 Mar 2021 16:38 |
Last Modified: | 04 Mar 2023 01:13 |
Status: | Published |
Publisher: | Elsevier |
Refereed: | Yes |
Identification Number: | 10.1016/j.jbusvent.2021.106105 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:172243 |