Posts tagged with: UK’s Spatial Economics Research Centre

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.