| Since Schumpeter(1934),the idea that entrepreneurship is critical for creative destruction and economic development has been widespread.Entrepreneurs are responsible for the creation of new firms,job creation,and technological innovation(Paulson and Townsend,2004).Entrepreneurs are engines of economic growth,and differences in levels of entrepreneurial activity are linked to income disparities across countries and regions.However,economists have long presumed that there is too little entrepreneurial activity,this presumption has justified a long history of attempts,in practice and in the academic literature,to identify factors that would affect entrepreneurial activity(Gordon,2018).In practice,governments around the world have set in place a number of policies or institutions aimed at promoting entrepreneurship.However,studies related to entrepreneurship develop relatively late and still in its infancy.First,academic research on entrepreneurship is somewhat hampered by fundamental issues surrounding the definition of entrepreneurs;in addition,there is a growing body of work that examines the impact of micro policies on business activity,but little attention has been paid to how these policies affect entrepreneurship,and even in the limited relevant research,no unified conclusion has been reached;Finally,due to data unavailability,most empirical work has focused on selfemployment and firm creation or survival in developed countries,and few studies have been conducted in developing countries.Accordingly,based on the perspective of financing costs,tax costs,labor costs,and environmental protection costs,and combined with the existing research on entrepreneurship and China's special institutional background,this paper uses micro survey data and unique China's new firm registration data to explore the influencing factors and mechanism of entrepreneurship,which is a useful complement to the existing literature.The conclusions are as follows:First,based on the perspective of financing cost,the first part of our empirical analysis exploits a quasi-natural experiment,namely,the Postal Savings Bank of China(PSBC)gaining official approval in 2006 to launch its own loan business,to investigate the causal impact of improved access to credit on entrepreneurship.Findings reveal that improved access to credit has sizeable positive effects on entrepreneurship,especially in capitalintensive industries and areas with high levels of government institutional quality.Our results are robust to different specifications and alternative measures.Two plausible mechanisms driving our findings are financial constraints and increased demand.Estimations based on the individual-level data of self-employment further support our findings.We also find evidence that access to credit can increase regional employment and business survival rate.Second,based on the perspective of tax cost,using a staggered Value-Added Tax(VAT)reform in China as an exogenous shock to conduct difference-in-differences estimation,the second part of our empirical analysis finds that tax incentives have a considerable positive effect on local entrepreneurship.Plausible mechanisms driving our findings are financial constraints and government intervention.Our results are robust to a battery of endogeneity tests and alternative specifications based on individual-level data.We find that capitalintensive industries,high technology industries,and areas with high levels of trust or commercial cultures,undergo greater entrepreneurship after the VAT reform.In addition,the VAT reform also promotes local innovation level.Third,based on the perspective of labor cost,the third part of our empirical analysis investigates the effects of minimum wage(MW)policies on entrepreneurship by using all contiguous county-pairs in China that straddle prefecture borders.We find that the MW significantly and negatively affects entrepreneurship,and the results are robust to a battery of tests based on different specifications.A plausible mechanism might be the crowd-out effect of increase of labor cost,given that our findings are particularly strong in laborintensive industries,in areas with higher labor costs or low-level access to finance.Fourth,based on the perspective of environmental protection cost,the fourth part of our empirical analysis investigates the causal effect of environmental regulation on entrepreneurship.By using China's Two Control Zones policy(TCZ)in 1998 as an exogenous shock and a novel dataset about firm creation,our difference-in-differences-indifferences estimation shows that environmental regulation significantly deters entrepreneurship.Our results are robust to a series of endogeneity and robustness tests.A plausible mechanism is that the stringent regulation increases firm's production costs,thus reducing expected profits and crowding out entrepreneurship.Moreover,we find that environmental regulation has a sizable and statistically significant effect only on entrepreneurship in areas with low corruption,high transparency or institutional quality,as entrepreneurs can hardly evade regulations through rent-seeking activities or other means.The research innovations and contributions are as follows:First,this paper complements the literature on the entrepreneurship in developing countries based on a relatively unique data.The existing research on entrepreneurship mainly focuses on developed countries,while the research on developing countries is limited.And the measurements of entrepreneurship have not yet reached a consensus.Due to data unavailability,most empirical work has focused on self-employment based on individual-level data(Holtz-Eakin et al.,1994;Faggio and Silva,2014;Martínez et al.,2018)and firm creation or survival in developed countries(Black and Strahan,2002;Kerr and Nanda,2009,2010),and few studies have been conducted in developing countries.To fill the research gap,we focus on China,the largest developing country in the world,and use both micro survey data and China's new firm registration data to measure entrepreneurship from the individual and regional level,which is a useful complement to the existing literature.These registration data are much better than a survey-based dataset because they are large and unexplored,include a large proportion of small and young firms,and cover all the regions of China.Therefore,the data improve the representativeness of our overall sample and are particularly relevant for studying the issue of entrepreneurship.Second,our study contributes to the extensive literature on the determinants of entrepreneurship.Previous research found that individual characteristics(Karlan and Valdivia,2011;Schmalz et al.,2017),financial development or access to finance(Black and Strahan,2002;Kerr and Nanda,2009),government regulation(Klapper et al.,2006;Branstetter et al.,2014),and institutional environment(Baumol,1996;Chemin,2009;Harper,2013)are part of the determinants.On the basis of the existing research and from the perspective of the cost and Chinese special system background,this paper adds to the empirical literature by exploring how the micro institutional arrangements affect entrepreneurship and its potential mechanisms.Third,a major challenge for our study is to identify the causal effects.Good instrumental variables or exogenous shocks can effectively mitigate this problem.Based on the cost perspective,this paper uses the related exogenous shocks of PSBC loan business reform,value-added tax reform,minimum wage policy,and TCZ policy to explore the causal effect of access to bank credit(financing cost),tax incentives(tax cost),minimum wage(labor cost),and environmental regulation(environmental protection cost)on entrepreneurship and the potential mechanisms. |
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