Disrupted education, underdogs and the propensity for entrepreneurship: Evidence from China?s sent-down youth program

Societal crises, such as those presented by COVID-19, disrupt the education experiences of youth and deprive them of human capital. Studies show that more human capital gained through education increases the propensity for new business formation. We suggest and find consistent results for the complementary perspective that disrupted education increases such inclination, contributing to theory on human capital. We deploy Mao Zedong's decision to remove 17 million Chinese use from their schools to the countryside as a natural experiment to test hypotheses. Results from difference-in-differences estimation procedures show that disrupted education increases the propensity for entrepreneurship by over seven per cent, which is stronger for those with parents from elite backgrounds.

Automated summary

Societal crises disrupt education experiences and deprive youth of human capital, but studies show that disrupted education actually increases the propensity for entrepreneurship, especially for those from elite backgrounds.