Abstract
Using a panel of China’s 31 provinces over 1978–2017, we examine the effects of entrepreneurship on economic growth in the context of China’s transformation from a centrally planned to a market-oriented economy. We divide entrepreneurship into two types: business creation and innovation. Our panel data estimation results show that both types of entrepreneurship have significantly positive effects on growth rate of China’s GDP per capita over the sample period. Specifically, annual growth rate of GDP per capita will increase by 0.75–1.625 percentage points if business creation entrepreneurship increases by ten percentage points. Innovation has a lag impact on economic growth. Annual economic growth rate will increase by 0.05–0.188 percentage points if innovation in the last period increases by ten percent. When business creation entrepreneurship increases by one standard deviation, annual growth rate will increase by 1.53–3.32 percentage points; and when innovation entrepreneurship (last period) increases by one standard deviation, annual growth rate will increase by 0.03–0.12 percentage points. The results are robust even when we control for different sets of independent variables. China’s transition and development experience show that a strong government does not conflict with the role of entrepreneurs and free markets.
Published Version
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