Unlocking entrepreneurial activity through administrative restructuring: Evidence from China’s County-to-District reform

The County-to-District (CTD) reform, an important administrative restructuring policy promoted by the Chinese government to advance urbanization, has played a crucial role in China’s urbanization process over the past four decades. Based on county-level panel data from 2007 to 2021, this paper employs a staggered difference-in-differences (DID) approach to empirically and systematically examine the impact of the CTD reform on regional entrepreneurial activity. The results show that CTD significantly promotes regional entrepreneurial vitality. Market expansion and income improvement, infrastructure consolidation and financial support, as well as technological innovation and factor reallocation, constitute the main transmission channels. Heterogeneity analyses indicate that the positive effects of CTD on entrepreneurship are more pronounced in the central and western regions, in ordinary counties, and in counties with higher fiscal self-sufficiency. Further estimations using the generalized random forest algorithm reveal the conditional average treatment effects (CATE) of the CTD reform and explore the relationship between county characteristics and the estimated CATE. In addition, the implementation of CTD significantly enhances entrepreneurial activity in the tertiary and secondary industries, while exerting a significant inhibitory effect on entrepreneurship in the primary industry. Spatial econometric analysis further indicates a notable “diffusion effect” of the policy. Overall, this study provides both theoretical and empirical evidence for a deeper understanding of the relationship between the CTD reform and regional entrepreneurial dynamism.