Natural disaster experiences and household entrepreneurship: Evidence from China

Abstract

This paper investigates the impact of natural disaster experiences on household entrepreneurship in China. Drawing on retrospective information about life experiences, we find that households affected by recent natural disasters are 3.2 percentage points less likely to engage in entrepreneurship. Our findings are robust across various methodologies, including an instrumental variable approach, propensity score matching, and a difference-in-differences model. This negative effect is mitigated for households residing in first-tier cities, cities with higher levels of social capital, cities with greater local medical insurance coverage, and households with female heads or higher levels of education. Furthermore, we provide evidence that the impact of disaster experiences is primarily driven by increased risk aversion and tightened financial constraints.