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Why Do Entrepreneurs Enter Politics? Evidence from China

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  • Hongbin Li
  • Lingsheng Meng
  • Junsen Zhang

Abstract

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.

Suggested Citation

  • Hongbin Li & Lingsheng Meng & Junsen Zhang, 2006. "Why Do Entrepreneurs Enter Politics? Evidence from China," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 559-578, July.
    • Handle: RePEc:oup:ecinqu:v:44:y:2006:i:3:p:559-578
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    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • H00 - Public Economics - - General - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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