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Entrepreneurial Reluctance: Talent and Firm Creation in China

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Listed:
  • Chong-En Bai
  • Ruixue Jia
  • Hongbin Li
  • Xin Wang

Abstract

The theoretical literature has long noted that talent can be used in both the entrepreneurial and non-entrepreneurial sectors, and its allocation depends on the reward structure. We test these hypotheses by linking administrative college admissions data for 1.8 million individuals with the universe of firm registration records in China. Within a college, we find that individuals with higher college entrance exam scores – the most important measure of talent in this context – are less likely to create firms, but, when they do, their firms are more successful than those of their lower-score counterparts. Additional survey data suggest that higher-score individuals enjoy higher wages and are more likely to join the state sector. Moreover, the score-to-firm creation relationship varies greatly across industry, according to the size of the state sector. These findings suggest that the score is positively associated with both entrepreneurial ability and wage-job ability but higher-score individuals are attracted away by wage jobs, particularly those of the state sector.

Suggested Citation

  • Chong-En Bai & Ruixue Jia & Hongbin Li & Xin Wang, 2021. "Entrepreneurial Reluctance: Talent and Firm Creation in China," NBER Working Papers 28865, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28865
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    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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