Acton Institute Powerblog

Buying a House Makes People Less Entrepreneurial

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Suzy Khimm points out an interesting study from the UK’s Spatial Economics Research Centre:

Our fixed-effects estimates show that purchasing a house reduces the likelihood of starting a business by 20-25%. … This result is driven by homeowners with mortgages and persists for several years after entering homeownership. … We argue that this finding can be rationalized by the fact that homeowners typically have to overinvest in housing (Brueckner, 1997; Flavin and Yamashita, 2002) and therefore cannot adequately diversify their portfolio. As a consequence, individuals choose not to start-up their own business venture at the same time as becoming homeowners since this would imply taking on significant additional risk. Stated differently; investments in homeownership crowd out entrepreneurial engagement.

The findings aren’t all that surprising, of course. Many major life events—getting married, having a baby, etc.—are likely to lead a person to become more risk averse and thus less entrepreneurial (at least in the short term). But it’s a reminder that the inordinate emphasis Americans place on home ownership can have broad-ranging (and potentially negative) effects on the economy.

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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