Analysis of Capital Constraints and Influence on the Choice of Rural Households’ Entrepreneurial Fields: Evidence from Jiangsu Province in China

Abstract

The “financing difficulty” and “high expense of financing” in rural areas are the main reasons that restrict the development of rural households’ entrepreneurship, and the supply-side reform provides an opportunity to improve the rural financial environment. In this paper single variable Probit model is used, Heckman probit model and 1376 Jiangsu micro survey data to analyze the reason of farmers’ entrepreneurship. The result shows that the capital constraints exist widely in the entrepreneurship. Different kinds of capital constraints also have different effect on the field choice of farmers’ entrepreneurship. Farmers with higher property income and the more formal credit invest more probably in the non-agricultural industry, while farmers with higher formal credit frequency and the identity of creditable household will with high probability engage in the agricultural sector. In addition, the factors such as household’s age, political capital, area of cultivated land, and target recognition ability also have a significant impact on the field choice of entrepreneurship. The conclusions can provide implications for the supply-side structural reform of rural financial institutions and the policy-making of supporting entrepreneurship.