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Reluctant Entrepreneurs: Evidence from China’s SOE Reform

Author

Listed:
  • Hanming Fang

    (University of Pennsylvania and the NBER)

  • Ming Li

    (Chinese University of Hong Kong)

  • Zenan Wu

    (Peking University)

  • Yapei Zhang

    (ShanghaiTech University)

Abstract

We study the impact of state-owned enterprises (SOEs) on the quality of entrepreneurship in China. Using long series of firm registration and performance data, we document that the massive SOE downsizing in the late 1990s significantly improved the quality of entrepreneurship. Compared with entrepreneurs in other time periods, firms founded by the reluctant entrepreneurs induced by the SOE layoffs have better performances. To explain these results, we present a simple model of occupational choices where high-skilled individuals obtain a higher value than low-skilled individuals from the benefits offered by SOE jobs, leading them to select into the SOE sector in the pre SOE reform era. When the SOE sector was downsized, some high-skilled SOE employees were reluctantly unleashed into entrepreneurship. We also provide corroborating evidence for other implications of the model.

Suggested Citation

  • Hanming Fang & Ming Li & Zenan Wu & Yapei Zhang, 2023. "Reluctant Entrepreneurs: Evidence from China’s SOE Reform," PIER Working Paper Archive 23-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:23-014
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    File URL: https://economics.sas.upenn.edu/system/files/working-papers/23-0014%20PIER%20Paper%20Submission.pdf
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    More about this item

    Keywords

    Entrepreneurship; Job Displacement; State-owned Enterprise;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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