Document Type
Discussion Paper
Publication Date
12-19-2024
CFDP Number
2406R1
CFDP Pages
57
Abstract
This research examines the determinants of entrepreneurship in China’s transition from agriculture to domestic production in the 1990’s and the subsequent transition to exporting in the 2000’s. The model that we develop and test to describe these transitions incorporates a productivity enhancing role for community (birth county) networks, which emerge in response to weak market institutions at early stages of economic development. Using administrative data covering the universe of registered firms over the 1994-2012 period and the universe of exporters over the 2002-2012 period, we provide causal evidence that these networks of firms were active and effective in increasing the revenues of their members, both in domestic production and exporting. While this substantially increased entry into domestic production in the first transition, the incumbent domestic networks created a disincentive to enter exporting in the second transition that outweighed the direct positive effect of the export networks. Our analysis provides a novel characterization of the development process in which community-based networks emerge at each stage to support the economic activities of their members, and pre-existing networks slow down the growth of networks (drawn from the same population) that follow.
Recommended Citation
Dai, Ruochen; Mookherjee, Dilip; Munshi, Kaivan; and Zhang, Xiaobo, "Community Networks, Entrepreneurship and the Process of Economic Development" (2024). Cowles Foundation Discussion Papers. 2825.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2825