Social credit system construction and entrepreneurial activity: A quasi-natural experiment from China

Abstract

This study investigates the impact of the improved social credit environment on entrepreneurial activity. We conduct the time-varying difference-in-differences model based on the quasi-natural experiment of constructing China’s Social Credit System (SCS) and find that the implementation of this institution significantly improves entrepreneurial activity, which remains robust to a series of tests. Mechanism tests reveal that the SCS influences entrepreneurial activity through material, human, and social capital agglomeration effects, as well as by alleviating information asymmetry. Heterogeneity analysis demonstrates that the positive impact of SCS is more obvious in promoting entrepreneurial activity within private enterprises, high-tech, and manufacturing industries. Furthermore, this entrepreneurial effect is more pronounced in cities with lower administrative levels and on the southeast side of the Hu Huanyong Line.