The Effect of Dependency Burden on Household Entrepreneurial Exit Behavior: Empirical Evidence from Chinese Households

Abstract

The elderly dependency ratio in China has increased from 10.7% in 2003 to 17.8% in 2019, and there may be a link between the widespread withdrawal of family entrepreneurship in society and the increased dependency burden. Based on China Family Panel Studies, we empirically examine the impact of dependency burden on household entrepreneurial exit behavior. We find that the likelihood of household exit from entrepreneurial activity increases as the population ages. Compared to active exit from entrepreneurship, dependency burden mainly induces failure exit from household entrepreneurship. In addition to reducing physical capital accumulation and labor supply, dependency burden also reduces the household workforce’s mental and physical health, leading to the entrepreneurial exit. The application of digital technology can mitigate the negative effects of dependency burden in household entrepreneurship. The mitigating effect of digital technology will be enhanced with the deepening of the application. Therefore, government and academia need to pay attention to the negative effects of dependency burden on the sustainability of household entrepreneurship.