Self-employment survival in China: does family involvement matter?

Abstract

Using data from the China Household Finance Survey spanning 2015–2019, we investigate the relationship between family involvement and self-employment survival. Instrumental variables are used to address the potential endogeneity of family involvement. We show that family involvement is crucial in reducing self-employment exit. This significant effect is more pronounced in elderly self-employed and self-employed with children aged 0–5. The underlying mechanisms reveal that family members’ participation in self-employment flexibly allocates idle household labor and improves the household employment rate. Meanwhile, self-employment with family involvement may have better access to credit and better performance, thus enhancing self-employment survival. Our findings are validated by robustness checks, including a discrete time complementary log–log model and estimations using alternative measurements of family involvement and self-employment exit. Our study has useful implications for policy-makers to stimulate family involvement to promote self-employment survival.