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Education and migrant entrepreneurship in urban China

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  • Cheng, Zhiming
  • Smyth, Russell

Abstract

We utilize the implementation of the 1986 Compulsory Education Law in China as a natural experiment to examine the relationship between educational attainment and migrant entrepreneurship. Using data from the 2017 China Migrants Dynamics Survey, results from our preferred two-stage least square model, which uses instrumental variable and difference-in-differences estimators to correct for endogeneity, suggest that having one additional year of education generates a 3.5 percentage points increase in the probability of being an employer entrepreneur vis-à-vis an employee, and a 4.7 percentage points increase in the probability of being an employer entrepreneur vis-à-vis a solo entrepreneur. Having better education, however, does not affect the propensity to become an entrepreneur in general vis-à-vis an employee or a solo entrepreneur vis-à-vis an employee. These results are robust to various checks including alternative estimation methods and ways of defining entrepreneurship. We also explore the channels through which educational attainment influences whether one chooses to become an employer entrepreneur. Our findings suggest that assortative mating, difficulties experienced in the host location, permanent settlement intention and social capital mediate the relationship between better education and the choice of both becoming an employer entrepreneur vis-à-vis a solo entrepreneur and an employer entrepreneur vis-à-vis an employee, while risk preferences are a mechanism through which education affects the probability of becoming an employer entrepreneur as opposed to a solo entrepreneur.

Suggested Citation

  • Cheng, Zhiming & Smyth, Russell, 2021. "Education and migrant entrepreneurship in urban China," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 506-529.
  • Handle: RePEc:eee:jeborg:v:188:y:2021:i:c:p:506-529
    DOI: 10.1016/j.jebo.2021.05.040
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    16. Mirjam Praag & Arjen van Witteloostuijn & Justin van der Sluis, 2013. "The higher returns to formal education for entrepreneurs versus employees," Small Business Economics, Springer, vol. 40(2), pages 375-396, February.
    17. Joern H. Block & Lennart Hoogerheide & Roy Thurik, 2009. "Education and Entrepreneurial Choice: An Instrumental Variables Analysis," Tinbergen Institute Discussion Papers 09-088/4, Tinbergen Institute, revised 23 Nov 2010.
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    More about this item

    Keywords

    Education; Migrants; Entrepreneurship; Employer entrepreneur; Solo entrepreneur; China;
    All these keywords.

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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