Government Intervention, Economic Freedom and Entrepreneurship: Empirical Evidence from China

摘要

Government intervention is commonly believed to has detrimental effects on entrepreneurship in market economy. However, when it comes to China (a transitional economy, of which the driving force behind economic development and entrepreneurship promotion derived mainly from the local governments) does this general judgment hold nevertheless? To answer that question, our empirical analysis, based on cross-sectional data of all the mainland provinces and municipalities of China (excluding Tibet) in 2000 and SEM calculation tests the correlation among government intervention, economic freedom and entrepreneurship. We find that the government intervention had an immediate influence on entrepreneurship positively in specific, but denied economic freedom in general, which is vital elements conducive to entrepreneurship and economic growth, thus impact entrepreneurship negatively in the long run. To account for this paradox, we come up with four possible reasons and the policy implications: the prescription for economic growth and entrepreneurship is to reduce government inference and create an institutional, free environment that encourages and rewards productive activities.