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Why Do Entrepreneurs Enter Politics? Evidence from China

  • Hongbin Li
  • Lingsheng Meng
  • Junsen Zhang

This article examines the determinants of the entrepreneur's political participation by employing a unique matched firm-institution data set from China. We find that the likelihood of an entrepreneur's participation can be explained by the underdevelopment of markets and market-supporting institutions. According to our estimates, the probability of entering politics decreases by 8--20% from the mean when the institutional indices improve by one standard deviation. Our findings support the view that the institutional environment shapes the private entrepreneur's motivation to participate in politics; they also provide an example of how private entrepreneurs respond to state/market failure in developing and transition countries. (JEL G1, H00, O10, P2, P3) Copyright 2006, Oxford University Press.

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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 44 (2006)
Issue (Month): 3 (July)
Pages: 559-578

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Handle: RePEc:oup:ecinqu:v:44:y:2006:i:3:p:559-578
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