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Does Inequality Weaken Entrepreneurship——Empirical Evidence of China during the Transition Period

【Authors】
SUN Zao, LIU Lihua
【WorkUnit】
Xi'an Jiaotong University, 710061
【Abstract】

The essential requirement of an innovation-driven economy is to stimulate the entrepreneurship of all social members. Reducing inequality and its negative impact on entrepreneurship is important for achieving innovation-driven growth and realizing “fuller” and more “balanced” development. This paper constructs a dynamic model based on endogenous economic growth, depicts how inequality affects entrepreneurial innovation from a perspective of entrepreneurship (innovation supply), and examines the influence of inequality on entrepreneurship by using Chinese General Social Survey (CGSS) data and relevant interprovincial panel data. The paper finds: (1) Opportunity inequality has significantly reduced entrepreneurship, inequality of effort has positive impact on entrepreneurship, and income inequality and entrepreneurship show an inverted U-shaped relationship. (2) Better social insurance can partially offset the adverse effects of opportunity inequality and stimulate entrepreneurship, and lower investment cost of human capital can partially offset the negative effect of opportunity inequality on human capital accumulation. (3) Opportunity inequality remains a main constraint of human capital accumulation in which effort inequality hasn't played a stimulating role. This paper has profound policy implications: an important prerequisite for innovation-driven growth is to reduce opportunity inequality, increase inequality of effort, ensure proper social insurance, and reduce the investment cost of human capital, so as to stimulate mass entrepreneurship and generate new momentum of economic growth.

JEL:O31, E25, C33

【KeyWords】
Income Inequality, Opportunity Inequality, Entrepreneurship, Human Capital