Catastrophe’s Long Reach: How Historical Natural Disasters Shape Modern Entrepreneurship?

Abstract

The profound interplay between historical natural disasters and institutional dynamics can leave a long-lasting imprint on contemporary entrepreneurship. This paper investigates the enduring impact of historical natural disasters during China’s Ming and Qing dynasties on modern entrepreneurship. We find that regions with higher frequency of historical natural disasters show a reduced inclination towards entrepreneurship, which could be attributed to the negative effects of historical disasters on the risk-taking behavior, cultivation of trust culture, and human capital accumulation. This finding remains consistent after alleviating migration issues and utilizing both the regression discontinuity method and IV approach to address endogeneity concerns. Furthermore, we document that the introduction of drought-resistant crops and foreign direct investment could moderate these adverse effects on contemporary entrepreneurship. These findings not only highlight the persistent historical legacy in shaping the spirit of modern entrepreneurial endeavors, but also shed light on the broader, long-term economic impacts of climate change.

Keywords: Climate change, Historical natural disasters, Entrepreneurship, Institutions

JEL Classification: J21, O17, P20, Q54, Z10