​Labor Cost and Household Entrepreneurship


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Labor Cost and Household Entrepreneurship


Shuang Ma, Xiaoyu Meng

(School of Economics, Southwestern University of Finance and Economics)


[Astract] This paper mainly investigates the effect of the labor cost brought by the enterprise pension payments on residents’ entrepreneurial spirit. Based on the data from 2011 China Household Finance Survey(CHFS), we find families from the area with high pension insurance will have low entrepreneurial enthusiasm. After controlling characteristic variables such as householder, family and regional economic, the possibility of starting a family business will significantly decrease by 0.4% as the pension fee paid by enterprises increases by 1%. However, this negative relationship mainly exists in families that hire employees. But the family business without employees will not be affected. One factor that can explain this effect is that high pension insurance payment of enterprises will reduce the profitability. The profit of private enterprise will reduce by 11,600 Chinese Yuan if the payment increases by 1%. The other factor is that only people who have a preference towards risks would choose to start a business in the area with high pension payment. In order to improve entrepreneurial energy, the government needs to improve the business environment from the perspective of cost efficiency.

Labor Cost and Household Entrepreneurship Shuang Ma.pdf