Homeowner-Entrepreneurs, Housing Capital Gains, and Self-Employment

Using individual-level data from the 1985-2011 American Housing Survey panel, this paper confirms that housing capital gains encourage transitions into self-employment. Additional findings suggest that this occurs at least in part because homeownership provides an accessible source of potential financing that serves as a form of insurance for aspiring homeownerentrepreneurs. The link between homeownership and self-employment is also stronger for older homeowners who are wealthier and typically have more latitude to take on discretionary mortgage debt to finance an investment. Overall, our results provide support for arguments in previous studies that personal wealth and access to credit are important drivers of selfemployment. Our findings also provide a new justification for longstanding government support for homeownership: homeownership encourages self-employment. JEL Codes: J2, R2, M2