The Impact Of China's Factor Price Distortion On Regional Entrepreneurship

Mass entrepreneurship,as an important way to promote economic growth,increase employment,reconcile social contradictions,foster emerging industries,and promote social innovation capability in China,carries the burden of transforming China's economic structure and fostering new impetus for development under the new normal conditions.However,in recent years,with the slowdown of China's economic growth,structural drawbacks rooted in the mechanism system for a long time have begun to emerge,which has become a huge obstacle in the process of mass entrepreneurship.According to the realistic background of China's entrepreneurship development,the distortion of factor price caused by system is an important factor that hinders mass entrepreneurship.Based on this,this paper,from the perspective of factor price distortion,through the combination of theoretical and empirical research methods,aims to explain the impact of factor price distortion on regional entrepreneurship and the impact mechanism between them,so as to provide ideas and methods for promoting mass entrepreneurship in China.According to the realistic background of our country,after thoroughly examining the impact of factor price distortion on entrepreneurship,the authors of this paper believe that the existence of factor price distortion causes the relative cost variance between heterogeneous enterprises.Cost-competitive businesses tend to adopt strong competitive strategies to expel or curb the cost-disadvantageous ones from participating in the market competition,which weakens the entrepreneurial vitality in the market,and inhibits the entrepreneurial motives of the public to hinder the implementation of the mass entrepreneurship and innovation strategy.As a result,a complete path of transmission with “enterprise” as the medium is formed along the “factor price distortion?factor cost variance?entrepreneurial motivation? entrepreneurial vitality?entrepreneurship”.Following this line of thinking,the entrepreneurial theory system is combed comprehensively,and the factor price distorting mechanisms are integrated and improved based on the traditional theories of factor distortion and corporate development by taking into account the periodic characteristics of China's reform and opening up after drawing on and referring to modern economics theories and related research outcomes,with the emphasis on building relevant analytical framework and deeply interpreting the fundamental mechanism by which distortion impacts the entrepreneurship.Using this analysis framework,multidimensional in-depth investigation is carried out empirically to finally reach the conclusions and implications.The contents and conclusions of this paper are as follows:Firstly,the literature review is done.Literatures related to distortion and entrepreneurship theories are reviewed and combed comprehensively by literature review method.At first,the connotation of entrepreneurship is introduced in the narrow and broad senses,the role of entrepreneurship in the national economic growth is analyzed,multiple factors affecting entrepreneurship are summarized,and various indicators for measuring entrepreneurship in relevant studies are reviewed.Afterwards,the development history of distortion theory is combed,the related concepts of factor market distortion are explained,and the concepts involved in this paper,such as the economic distortion and factor price distortions,are defined clearly.The definition of factor price distortion,its impact on the economy and specific reasons for its formation in China are analyzed in detail,and various methods for calculating the degree of factor price distortion are sorted out.At last,the literatures on factor price distortion and entrepreneurship are reviewed rationally,and the research direction of this paper is decided based on the shortcomings in the existing literature,thus providing a comprehensive research basis for this paper.Secondly,China's entrepreneurship is measured.The overall and regional entrepreneurship of China from 2000 to 2015 are calculated comprehensively from the perspectives of entrepreneurial participation,entrepreneurial vitality and entrepreneurship scale based on the panel data of China.Meanwhile,the development track of entrepreneurship in China is mapped out.The calculations reveal a clear growth trend of China's overall entrepreneurship in terms of entrepreneurial participation.Nevertheless,the growth rate of entrepreneurial level showed a significant drop since 2010 and has been in a downward trend after 2013.Next,from the perspective of entrepreneurial vitality,the overall entrepreneurship underwent an “M” shaped variation of “rise ? decline ? rise ? decline” during year 2001 to 2012.Specifically,the level tended to elevate during year 2001 to 2004,declined gradually during year 2004 to 2008,experienced a brief recovery in 2009,and then fell again in 2010.Lastly,from the perspective of entrepreneurial scale,the overall entrepreneurial level showed an “N” shaped variation trend of “rise?decline?rise” during a period of 2001 to 2011,with the lowest point appearing between 2007 and 2008.Afterwards,the level entered a stable growth period,and in 2011,resumed its growth rate as in 2001.Clearly,China's overall entrepreneurial level has shown varying degrees of downward trends in recent years,especially since 2010.This suggests that the defects accumulated in the institutional mechanism during the transition period and the deep structural problems have seriously affected the entrepreneurial development in China.Thirdly,the degree of factor price distortion in China is measured.Translog production function model is built by selecting the time series data from 2000 to 2015 to measure the distortion degrees of capital,land and labor factor prices in 261 cities of various regions after comparing and analyzing the methods for factor price distortion measurement in the existing literature.The calculations reveal that the factor prices of capital,land and labor all underwent varying degrees of distortion over the studied time period.Among them,the distortion direction of capital factor price is negative,with the degree of distortion gradually shrinking and then being stabilized.This indicates that China's capital interest rate is maintained at a low level for a long time,and that the development model of low interest rate and high investment is an important source of impetus for China's economic growth.Nevertheless,with the deepening of market-oriented reform in China,the price distortion in the capital market has been alleviated,and the price mechanism has been functioning.The distortion direction of labor factor prices is constantly changing over time,which transits gradually from negative to positive,with a turning point occurring around 2011.This suggests that as China's labor price continues to rise,the huge demographic dividend long present in the economy is gradually disappearing and will soon vanish.The distortion direction of land factor price is positive,indicating that the actual transaction price of land factor in China is generally higher than the benchmark price of land transfer,so the governments at all levels still have a large bargaining space when they grant land.Furthermore,the distortion of factor prices exhibits distinct regional characteristics,and the degree of factor price distortion varies by region.Fourthly,the mechanism by which the factor price distortion impacts entrepreneurship is studied.The specific transmission path and impact mechanism of factor price distortion on China's entrepreneurship are analyzed comprehensively by theoretical and empirical methods.The transmission path between factor price distortion and entrepreneurship is plotted based on the current status of distortion's impact on China's entrepreneurship,and the impact mechanism of factor price distortion on the entrepreneurship is simulated specifically with the game model.The results of theoretical research show that the prices of the same production factors vary relatively among enterprises under the influence of factor price distortion.Enterprises with relative cost advantages adopt strong competitive strategies to acquire production factors for the sake of profit maximization,who also expel or curb potential start-ups from participating in the competition of product market by altering production decisions,thereby obtaining higher long-term economic profits.Moreover,with the intensification of factor price distortion,the competitive strategies of factor cost-advantageous enterprises become stronger,their competitive edge over production factors becomes greater,and their ability to expel the cost-disadvantageous enterprises becomes higher.In this process,the entrepreneurial vitality in the market will drop substantially,and the level of entrepreneurship will be hindered seriously as the start-up cost and entrepreneurial difficulty rise.On this basis,this paper quantitatively analyzes the above impact mechanism based on the micro-panel data of Chinese enterprises and obtains the empirical results which are consistent with the theoretical expectations.Accordingly,the complete mechanism of impact of factor price distortion on China's entrepreneurship is derived.Fifthly,the concrete impact of factor price distortion on China's entrepreneurship.Based on the impact mechanism of factor price distortion on entrepreneurship,the impact of factor price distortion on China's entrepreneurship is examined systematically from different perspectives through empirical method based on a combination of the factor price distortion calculations with the entrepreneurship calculations.First,according to the overall nationwide regression results,factor price distortion has a significant negative inhibitory effect on China's entrepreneurship.This indicates that the price distortion phenomenon long present in China's factor market has become one major factor hindering China's entrepreneurial growth.Next,from the regression results by regions(eastern,central and western parts),such impact exhibits distinct regional distribution differences: From the perspective of entrepreneurial participation,the impact direction of land factor price distortion on the entrepreneurship in the western part of China is positive,indicating that the low land transfer price in the western region has become a hindrance instead of increasing the entrepreneurial involvement ratio of the labor force in the society.From the perspective of entrepreneurial vitality,the impact of capital factor price distortion on the entrepreneurship in the eastern region is also positive;suggesting that lowering the relative cost of capital factor in the region can better bring out the international competitiveness of China's Yangtze River Delta and Pearl River Delta areas and stimulate entrepreneurial vitality in the society.Finally,based on the above research conclusions,this paper proposes the following suggestions from two aspects: mitigation of factor price distortion and promotion of mass entrepreneurship.First,respecting the distortion mitigation,it is necessary to handle the relationship between the government and the market effectively according to the relevant development stage of local economy;to reform the existing household registration system to achieve the free flow of labor factors;and to accelerate the pace of factor market reform,and enhance the allocation efficiency of factor resources.In terms of promoting the mass entrepreneurship,China should deepen the reform of the state-owned economy,facilitate the development of non-public economy;create the entrepreneurial climate,foster the entrepreneurial environment;strengthen the soft and hard environments,and protect the growth and development of start-ups.In brief,this study combines “factor price distortion” and “entrepreneurship”,which provides a referential analytical framework for quantitatively analyzing the impact of factor price distortion on China's entrepreneurship.While enriching relevant research theories and methodologies,this study is helpful to evaluate the current situation of entrepreneurship and formulate more reasonable entrepreneurship policy,which is conducive to the promotion of “mass entrepreneurship and innovation” under the new normal,and in turn to the cultivation of new impetus for economic development.