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Does the business environment promote entrepreneurship?——Evidence from the China Household Finance Survey

Author

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  • Yu, Linhui
  • Tang, Xuepeng
  • Huang, Xianhai

Abstract

Drawing on data from the China Household Finance Survey and China's Urban Business Environment Index, this study examines the effects of the business environment on entrepreneurial behavior in China. The identification uses the instrumental variables approach to address possible endogeneity. The empirical results show that improving the business environment can create more employment opportunities, optimize the structure of employment, and promote entrepreneurship; in terms of different dimensions of the business environment, improvements in public services, the market environment, and the legal environment play a stronger role in promoting entrepreneurship; from the entrepreneurial process perspective, improving the business environment can significantly enhance entrepreneurial willingness, boost the “metabolism” of entrepreneurial groups, and increase individual entrepreneurial identity. Further analyses on the mechanism indicate that improving the business environment is conducive to individual entrepreneurship through the following four channels: (1) creating more entrepreneurial opportunities, (2) reducing operating costs, (3) reducing financing costs, and (4) improving contract enforcement.

Suggested Citation

  • Yu, Linhui & Tang, Xuepeng & Huang, Xianhai, 2023. "Does the business environment promote entrepreneurship?——Evidence from the China Household Finance Survey," China Economic Review, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:chieco:v:79:y:2023:i:c:s1043951x23000627
    DOI: 10.1016/j.chieco.2023.101977
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    Citations

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    Cited by:

    1. Li, Zhaohua & Pang, Suqin & Zhu, Zhiyun, 2024. "The impact of pilot free trade zones on entrepreneurship: Evidence from a quasi-natural experiment in China," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    2. Luo, Haotian & Hu, Qing, 2024. "A re-examination of the influence of human capital on urban-rural income gap in China: College enrollment expansion, digital economy and spatial spillover," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 494-519.
    3. Li, Xiuqing & Xiao, Liming, 2024. "The impact of urban green business environment on FDI quality and its driving mechanism: Evidence from China," World Development, Elsevier, vol. 175(C).
    4. Yiwei Wang, 2024. "Digital Financial Capability and Entrepreneurship in China: A Digital Economy Perspective," Sustainability, MDPI, vol. 16(16), pages 1-18, August.

    More about this item

    Keywords

    Business environment; Entrepreneurship; Employment structure;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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