Does the business environment promote entrepreneurship?——Evidence from the China Household Finance Survey

Drawing on data from the China Household Finance Survey and China's Urban Business Environment Index, this study examines the effects of the business environment on entrepreneurial behavior in China. The identification uses the instrumental variables approach to address possible endogeneity. The empirical results show that improving the business environment can create more employment opportunities, optimize the structure of employment, and promote entrepreneurship; in terms of different dimensions of the business environment, improvements in public services, the market environment, and the legal environment play a stronger role in promoting entrepreneurship; from the entrepreneurial process perspective, improving the business environment can significantly enhance entrepreneurial willingness, boost the “metabolism” of entrepreneurial groups, and increase individual entrepreneurial identity. Further analyses on the mechanism indicate that improving the business environment is conducive to individual entrepreneurship through the following four channels: (1) creating more entrepreneurial opportunities, (2) reducing operating costs, (3) reducing financing costs, and (4) improving contract enforcement.