Entrepreneurship and Education: An Analysis of the Impact of Compulsory Education Policies in Counties in China

Abstract

This paper investigates the influence of expanding free compulsory education on regional entrepreneurial activities, exploring both theoretical and empirical aspects. Our research comprises two main parts. Initially, we employ a novel economic geography model to theoretically assess the effect of extending free compulsory education on regional entrepreneurial endeavors, proposing four hypotheses for further examination. Subsequently, we empirically test these hypotheses using balanced panel data collected from 2528 districts and counties in China spanning from 2000 to 2021. The findings indicate that the expansion of free compulsory education indeed stimulates regional entrepreneurial activity. However, this policy’s impact is influenced by the local industrial structure and the knowledge level of residents. Notably, the effect becomes visible only after the third year of the policy’s enactment, and it demonstrates a certain spatial spillover. Our conclusions remain consistent even after accounting for various endogenous factors. Our research has the potential to offer invaluable countermeasures for other developing countries, enabling them to advance sustainable development by enhancing their obligations.