China has one of the most entrepreneurial cultures on Earth, according to Business Week:
The latest numbers from the Organization for Economic Cooperation & Development (OECD) show that China’s rate of self-employment far exceeds that in the U.S.—51.2% versus 7.2%—a gap that hasn’t changed much since 2001, when the data first became readily available….
More than 4% of the Chinese working-age population is engaging in high-growth-expectation entrepreneurship. In the U.S. that share is less than 1.5%.
I wonder how much the agricultural sector is responsible for that high rate of self-employment? 51.2% seems excessive for non-agricultural businesses. While I think that entrepreneurship is vital for economic growth and prosperity, I wonder if such a high rate is a good thing. Not as many economies of scale will be realized, the division of labor within a business will be reduced, etc.
I think the high rate comes down to a simple fact: It’s easy to start a business when there is not a big service sector present. In the past, many Chinese did their own laundry, grass cutting, cooking (vs. dining out), and house cleaning. As income rises, it only makes sense that businesses start to do these sorts of things. These businesses have very low capital and skill requirements.
Comparing US and Chinese entrepreneurs is comparing apples to oranges – US entrepreneurs have a much higher hurdle to jump in terms of both opportunity cost and existing competition.
Point taken. I did note in the post that such a high level of entrepreneurship might be inefficient, reflecting a lack of a division of labor, economies of scale, etc., rather than the reverse. As you mention, the high rate might reflect that transitioning of many functions from the “internal household sector” to the business sector, which is a good thing. However, greater specialization, consolidation, and many more processes are probably in their infancy, and over time, may lead to a lower rate of self-employment and greater economic efficiencies.
Why can’t we compare US and Chinese entrepreneurs, especially given that the indented quote in the post compares those involved in “high-growth-expectation entrepreneurship”? Presumably, such entrepreneurs aren’t cutting grass or doing laundry (or even starting restaurants). A high involvement in that kind of entrepreneurship probably leads to greater economic growth. Yes, US entrepreneurs face many hurdles, but so do Chinese ones: poor infrastructure, a poor financial system, weaker property rights, et al. Regardless, US entrepreneurs are not to blame; if anyone is, it is probably government policy (licensing and other barriers to entry, high taxes, labor laws, et al.).
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