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Externalities of home-ownership on entrepreneurship: empirical evidence

Jani-Petri Laamanen (University of Tampere, Tampere, Finland)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 30 October 2018

Issue publication date: 14 February 2019

269

Abstract

Purpose

This study aims to examine the externalities from regional home-ownership to individual-level entrepreneurship.

Design/methodology/approach

The paper links individual-level data from the Finnish Income Distribution Statistics for years 1990-1992 to regional home-ownership proportions. Probit models of entrepreneurship with regional home-ownership and appropriate control variables as regressors are estimated. A rental housing market deregulation experiment which caused exogenous variation in regions’ home-ownership is exploited to identify the causal effects on entrepreneurship.

Findings

Results show that higher home-ownership in a region leads to greater entrepreneurship. Further analyses together with the fact that homeownership tends to have detrimental labour market effects suggest that homeownership encourages entrepreneurship by leading to less paid work opportunities. These results are in line with those of earlier literature that self-employment and entrepreneurship, especially during bad economic times, are partly motivated by bad employment opportunities.

Originality/value

This study presents novel results on the externalities that home-ownership has on entrepreneurship. These externalities are shown to be important enough that they need to be considered when assessing the economic effects of various policies that affect the prevalence of owner-occupied housing. The instrumental variables’ estimates are the first causal estimates in the literature and the bias resulting from assuming exogeneity is shown to be nonnegligible.

Keywords

Acknowledgements

The author would like to thank Matti Hovi, Juho Jokinen and the participants of the meeting of the Finnish Economic Association in Turku. Financial support for the data from the Academy of Finland (project number 252369) is gratefully acknowledged.

Citation

Laamanen, J.-P. (2019), "Externalities of home-ownership on entrepreneurship: empirical evidence", International Journal of Housing Markets and Analysis, Vol. 12 No. 1, pp. 94-109. https://doi.org/10.1108/IJHMA-01-2018-0008

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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