“Only children” and entrepreneurship in China: Spillover effects and mechanisms

Abstract

This paper studies the effect of being an only child (with no siblings) on getting involved in entrepreneurial activities and the financial performance of these activities, and the potential cross-spouse effect. Based on a nationally representative random sample of Chinese individuals, fixed effect estimation results show that the probability of being an entrepreneur is reduced by 4.1 percentage points or 40% for only children. The spouse being an only child has a reducing effect of a similar size. We explore variation in the implementation of China's one-child policy to aid identification. Also, the financial performance of entrepreneurial activities is worse for only children. We examine the role of reliance on parents, lack of optimism, and simple social network as underlying mechanisms, and find that simple social network has the largest role. The findings help understand China's recent stagnant entrepreneurial activities. They suggest a consequential loss from population control policies in terms of entrepreneurial activities and performance, providing new perspectives on the evaluation of such policies.