How Does Urban Agglomeration Integration Promote Entrepreneurship in China? Evidence from Regional Human Capital Spillovers and Market Integration

43 Pages Posted: 3 Dec 2019

See all articles by Siqi Zheng

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate

Rui Du

Department of Economics, Oklahoma State University

Date Written: October 23, 2019

Abstract

Using firm birth records and startup data matched with cities’ characteristics, this paper analyzes nearly 300 prefecture-level cities to examine the role of human capital and market access in shaping the economic geography of innovation-driven entrepreneurship in China. We document strong positive entrepreneurial effects of local human capital resources and market size as well as market integration and human capital spillovers from mega urban agglomerations of integrated cities. Our estimates point to an elasticity of innovation-driven entrepreneurship with respect to human capital spillovers of 0.50-0.79. The elasticity with respect to market integration is 0.53-0.89.

Our results also suggest heterogeneous human capital spillover and market integration effects across urban agglomerations. These effects are more robust in first-tier urban agglomerations because first-tier urban agglomerations have a stronger economic base and greater connectivity. Strong human capital spillover and large gains from access to surrounding economic mass jointly highlight the integrated development of megaurban agglomerations in China. We discuss policy implications that concern promotion of local innovation-driven entrepreneurship by strengthening intercity coordination, building transportation and social infrastructure, and improving urban management.

Keywords: Entrepreneurship, Human Capital Spillover, Market Integration, Urban Agglomeration

JEL Classification: R11, R12, L26

Suggested Citation

Zheng, Siqi and Du, Rui, How Does Urban Agglomeration Integration Promote Entrepreneurship in China? Evidence from Regional Human Capital Spillovers and Market Integration (October 23, 2019). Available at SSRN: https://ssrn.com/abstract=3488704 or http://dx.doi.org/10.2139/ssrn.3488704

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

Rui Du (Contact Author)

Department of Economics, Oklahoma State University ( email )

347 Business Building
Oklahoma State University
Stillwater, OK OK 74078-0555
United States

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