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House Prices, The Supply of Collateral and the Enterprise Economy

Jane Black, David de Meza and David Jeffreys
The Economic Journal
Vol. 106, No. 434 (Jan., 1996), pp. 60-75
Published by: Wiley on behalf of the Royal Economic Society
DOI: 10.2307/2234931
Stable URL: http://www.jstor.org/stable/2234931
Page Count: 16
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
House Prices, The Supply of Collateral and the Enterprise Economy
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Abstract

This paper investigates the extent to which the supply of collateral affects business formation in the UK. Bank loans are typically secured on the entrepreneur's house. Using a variety of data and formulations, evidence is found that a 10% rise in the value of unreleased net housing equity increases the number of new VAT registrations by some 5%. Since we find that businesses formed in response to increases in the value of housing assets seem to be of at least average quality as measured by survival chances, there appears to be a large pool of untapped entrepreneurial talent.

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