Entrepreneurship and Economic Growth during Chinas Economic Transformation, 1978–2008

Abstract

Using Chinas provincial-level panel data from 1978–2008, we examine the effects of entrepreneurship on economic growth in the context of Chinas transformation from a centrally planned to a market-oriented economy. We divide entrepreneurship into two types: business creation and innovation. Our estimation results show both types of entrepreneurship have significant positive effects on Chinas GDP per capita growth rate over the sample period. Specifically, the annual growth rate of the GDP per capita will increase by 1.98 percentage points if business creation entrepreneurship increases by one standard deviation. Moreover, the annual growth rate will increase by 0.134 percentage points if innovation entrepreneurship increases by ten percent. The results are robust even when we control for different sets of demographical and institutional variables. Chinas experience shows a strong government does not conflict with the entrepreneurs role.