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Reluctant Entrepreneurs: Evidence from China’s SOE Reform

Author

Listed:
  • Hanming Fang
  • Ming Li
  • Zenan Wu
  • Yapei Zhang

Abstract

We study the impact of state-owned enterprises (SOEs) on the quality of entrepreneurship in China. Using long series of firm registration and performance data, we document that the massive SOE downsizing in the late 1990s significantly improved the quality of entrepreneur- ship. Compared with entrepreneurs in other time periods, firms founded by the reluctant entrepreneurs induced by the SOE layoffs have better performances. To explain these results, we present a simple model of occupational choices where high-skilled individuals obtain a higher value than low-skilled individuals from the benefits offered by SOE jobs, leading them to select into the SOE sector in the pre SOE reform era. When the SOE sector was downsized, some high-skilled SOE employees were reluctantly unleashed into entrepreneurship. We also provide corroborating evidence for other implications of the model.

Suggested Citation

  • Hanming Fang & Ming Li & Zenan Wu & Yapei Zhang, 2023. "Reluctant Entrepreneurs: Evidence from China’s SOE Reform," NBER Working Papers 31700, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31700
    Note: LS PE PR
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    More about this item

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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