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Events
Housing Collateral, Credit Constraints and Entrepreneurship: Evidence from a Mortgage Reform
March 18, 2015Poverty and Applied Microeconomics Seminar Series

Ramana Nanda (Harvard Business School) will present the results of some of his recent research.

Speaker: Ramana Nanda is an Associate Professor of Business Administration in the Entrepreneurial Management unit at Harvard Business School. More »

Abstract: We study how a mortgage reform that exogenously increased access to credit had an impact on entrepreneurship, using individual-level micro data from Denmark. The reform allows us to disentangle the role of credit access from wealth effects that typically confound analyses of the collateral channel. We find that a $30,000 increase in credit availability led to a 12 basis point increase in entrepreneurship, equivalent to a 4% increase in the number of entrepreneurs. New entrants were more likely to start businesses in sectors where they had no prior experience, and were more likely to fail than those who did not benefit from the reform. Our results provide evidence that credit constraints do affect entrepreneurship, but that the overall magnitudes are small. Moreover, the marginal individuals selecting into entrepreneurship when constraints are relaxed may well be starting businesses that are of lower quality than the average existing businesses, leading to an increase in churning entry that does not translate into a sustained increase in the overall level of entrepreneurship.

Paper: Housing Collateral, Credit Constraints and Entrepreneurship: Evidence from a Mortgage Reform

Last Updated: Mar 19, 2015

The Poverty and Applied Micro Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers in applied microeconomics from the fields of poverty, human development and public service delivery, agriculture and rural development, political economy, behavioral economics, private sector development, and a range of other fields to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Event Details
  • Date: March 18, 2015
  • Location: World Bank Headquarters, MC3-570
  • Time: 12:30 - 2:00 PM
  • CONTACT: Anna Bonfield
  • abonfield@worldbank.org