Dynamism Diminished: The Role of Housing Markets and Credit Conditions
American Economic Journal: Macroeconomics
vol. 16,
no. 2, April 2024
(pp. 29-61)
Abstract
We estimate the effects of house price changes on young-firm employment shares and industry-level employment growth in local economies. A novel test shows that house price effects on local economies work through wealth, liquidity, and collateral effects on the propensity to start new firms and expand young ones. Aggregating local effects to the national level, our estimates imply that housing market ups and downs play a major role—as transmission channel and driving force—in medium-run fluctuations in young-firm employment shares in recent decades. We also find a distinct and smaller role for locally exogenous loan-supply shifts.Citation
Davis, Steven J., and John Haltiwanger. 2024. "Dynamism Diminished: The Role of Housing Markets and Credit Conditions." American Economic Journal: Macroeconomics, 16 (2): 29-61. DOI: 10.1257/mac.20190007Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- L25 Firm Performance: Size, Diversification, and Scope
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R31 Housing Supply and Markets
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