Abstract
In rural areas, entrepreneurship helps lift households out of poverty by alleviating unemployment and increasing income, and financial literacy plays an important role in promoting entrepreneurship. Social capital is a resource embedded in social relationships, the boundaries of which have been expanded by the development of information communications technologies (ICTs). This article aims to link social capital, financial literacy, and rural entrepreneurship through a partial mediating effect analysis. Using data from the 2015 China Household Finance Survey (CHFS), we analyze how social capital affects rural entrepreneurship and the role of local ICTs development in this effect while also accounting for reverse causality. We construct a social capital indicator, mainly referring to bridging social capital, and two financial literacy indicators to make the conclusions robust. The empirical results show that social capital promotes rural entrepreneurship by sharing financial literacy. Furthermore, the spread of ICTs enhances this mediating effect. Our study provides empirical evidence for encouraging entrepreneurship and promoting knowledge sharing and implies the importance of ICTs in promoting entrepreneurship in rural areas.
Highlights
Rural areas are facing the challenges of slow development and population decline
The results show that there is a significant positive correlation between the core variables social capital, financial literacy and entrepreneurship, which implies that further regression analysis is necessary
After merging information communications technologies (ICTs) adoption data with household data, we find that provinces with higher ICTs adoption rates are more conducive to entrepreneurship (63.371 vs. 62.814)
Summary
Rural areas are facing the challenges of slow development and population decline. Rural development is a vicious cycle in which a lack of a critical mass of services and infrastructure leads to a lower rate of business creation, and fewer job opportunities cause out-migration and aging (Paniagua, 2013; Pato and Teixeira, 2016). More rural families are migrating to cities considering better public services and employment opportunities, which brings congestion, corruption and poverty to urban areas (Musemwa, 2010; Boohene and Agyapong, 2017). Rural entrepreneurship contributes to creating jobs and increasing income by enabling households to participate in income-generating activities (Kijima et al, 2006; Naminse and Zhuang, 2018). In this sense, ways of encouraging rural entrepreneurship have become an extremely important issue. Financial knowledge is a measure of the ability to understand and use economic and financial information
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