Regional differences in self-employment in China

Abstract

This paper investigates the impact of personal characteristics and institutional environment on the decision to be self-employed in China. It is shown that a difference in the likelihood of being self-employed exists between urban and rural areas. Our results show that institutional differences between rural and urban areas influence self-employment decisions. Factors that exert a consistent impact regardless of the local institutional environment are marriage, education, money spent on weddings and gifts, economic openness, and accessibility of information. The impact of other factors differs across rural and urban areas. These factors include family ownership of real estate, experience, gender, population density, the management capacity of local government, and the development of private economy in the local community.