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Social Trust and Entrepreneurship: Insights from China's Social Credit System

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  • Fang, Hongxing
  • Chen, Linghong
  • Xiong, Jiacai
  • Zhu, Yushu

Abstract

This study examines the impact of China's Social Credit System (CSCS) pilot policy on entrepreneurship on a panel of 2,256 city-year observations across 282 cities from 2012 to 2019. We find that the social credit system promotes entrepreneurship, with the effect being more pronounced in regions characterized by weaker legal environments, lower levels of marketization, and poorer economic conditions. The underlying mechanisms facilitating this impact encompass improved access to bank credit, increased talent attraction, and diminished regional corruption. Our study enriches the existing literature on the relationship between social credit and entrepreneurship and provides policy insights for promoting regional entrepreneurial endeavors.

Suggested Citation

  • Fang, Hongxing & Chen, Linghong & Xiong, Jiacai & Zhu, Yushu, 2024. "Social Trust and Entrepreneurship: Insights from China's Social Credit System," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s154461232400148x
    DOI: 10.1016/j.frl.2024.105118
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    More about this item

    Keywords

    Social credit; Trust; Entrepreneurship; Bank credit; Talent attraction; Regional corruption;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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