Abstract
This paper explores the relationship between rural to urban migration and entrepreneurship in China. We compare entrepreneurship between return migrants who used to work in a province other than their home province and migrants whose work experience is limited to within their home province. Migrants who leave their home province lose rooted social networks and immediate support from relatives and friends, but might gain new social networks, human capital and financial capital, which eventually enable them to enter entrepreneurship more easily. The factors tested for their association with entrepreneurship include a range of individual characteristics, human and social capital, financial capital, city fixed effects and industry fixed effects. Significant heterogeneous patterns across regions suggest the active eastern market is more conducive to entrepreneurship than the sluggish western market. Return migrants in the East accumulated more human capital and social capital, have more self-financed fund and are more likely to start a business at the same time.
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Notes
See Zhu and Luo (2014) for a literature review.
Zhang and Zhao (2015), using Rural–Urban Migration in China and Indonesia (RUMiCI) data from 2008, which shares the same source as our 2007 CHIP data, show that it is not the case that only truly unemployable people fell into self-employment. Top reasons for being self-employed include earning a higher income, having flexibility and freedom and being one’s own boss. We also run income regressions and find that the self-employed earn significantly more than the employed. Furthermore, return entrepreneurs earn more than staying entrepreneurs, but the difference is not significant. To save space, the regression results are not reported but can be requested from the authors.
We perform a robustness check by excluding this 9.5 % of internal migrants. The results in Table 3 are qualitatively unchanged.
Due to low representation of rural residents, we exclude Shanghai from our sample. Local residents with a rural Hukou in Shanghai only constitute about one percent of the sample.
Another reason to use a linear probability model is because it is preferred when one needs to instrument for an endogenous independent variable, where we use the instrumental variable approach as explained further in this section (Angrist and Krueger 2001). We also run a probit model as a robustness check for our model specification. The results are qualitatively unchanged. For simple interpretation of coefficients, we opt for simple OLS regression models.
We also perform robustness regressions by excluding the migrants who ever started a business before 2007. The results are qualitatively unchanged.
We admit that there are two levels of selection in our study that matters for employment choice. The first selection of the sample is to include the rural-to-urban migrants and not to consider non-migrants. The second selection is to include the returnees and within-province migrants and to exclude floating migrants who are still in other provinces. Giulietti et al. (2012) which uses the same dataset find that there is no discernible relationship between the rural-to-urban migration choice and self-employment choice. We therefore do not consider the first-level selection and focus on the second-level selection problem.
By adding the group of migrants who are still in the other province in the regressions, we in fact are able to reduce the omitted variable bias in estimating whether there are common unobserved factors that affect both floating migration and return migration.
The standard errors for most estimates increased, making the estimates less significant than the previously estimated.
Even though the return migrant sample in the East is relatively small, the eastern market has 999 observations, which is large in the whole sample. The number of observations in the West is 832, less than that in the East. Therefore, we could not conclude that we find a positive or negative EMB in China in general. The EMB is found to be heterogeneous across regions.
Individuals in the western and central provinces are “pushed” to be self-employed, compared to those in the eastern provinces. The average income is 2125, 1917 and 2280 RMB yuan for entrepreneurs in the western, central and eastern provinces, respectively. The push entrepreneurship is relative in the sense of regional differences. In contrast, the average income is 1157, 1212 and 1564 RMB yuan for non-entrepreneurs in the western, central and eastern provinces, respectively. Within each region, entrepreneurs earn more than non-entrepreneur migrants. This is consistent with Zhang and Zhao (2015), which also find that entrepreneurs among migrants are not pushed due to limited job opportunities.
We got qualitatively same results by using the number of counties that migrants ever worked in to measure human capital and therefore is not reported due to limited space.
Someone may be concerned with the possibility that people with more social networks tend to have more information and can diversify income sources by sending some family member(s) to somewhere far away. In this case, the positive relationship found in Table 7 is not causal and the causality should even be reversed. However, we believe this is not a serious problem and does not threat our conclusion. First, the timing of measuring social network is by the time of the survey but off-home-province migration decision was made way before social network measures was elicited. Social network accumulated over time during migration is less likely to affect the migration choice years ago. Second, Zhang and Zhao (2015), using the same dataset as ours, find that social networks of migrants farther away from hometowns abate over distance from home provinces, rather than accrue with distance.
We replace the variable OFF by using three dummy variable OFF_East, OFF_West and OFF_Central, but we did not find a significantly different pattern and therefore choose not to report the results.
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Acknowledgments
We gratefully acknowledge the funding support from Beijing Natural Science Foundation (Project No. 9154034), National Natural Science Foundation of China (Project No. 71403303) and the Program for Innovation Research in Central University of Finance and Economics. Our thanks also go to the editor and anonymous referees for their valuable comments. We very appreciate comments from Anping Chen, Jinan University, participants of the 3rd International Workshop on Regional, Urban, and Spatial Economics in China and seminar participants at Chinese Academy of Social Science.
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Yu, L., Yin, X., Zheng, X. et al. Lose to win: entrepreneurship of returned migrants in China. Ann Reg Sci 58, 341–374 (2017). https://doi.org/10.1007/s00168-016-0787-0
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DOI: https://doi.org/10.1007/s00168-016-0787-0