Entrepreneurship and Economic Growth: Is Entrepreneurship More Effective at Stimulating Growth in a High-Income Trap Economy Than in a Smaller, Rapidly-Growing Economy?

Abstract:

In the latter half of the twentieth century, the economic policymakers of the People’s Republic of China began instituting careful regulation and strategic opening up to foreign investment (Branstetter 2008). Concurrently, Taiwan (Republic of China) took a political departure and began independently instituting land, infrastructure, communications, and educational reforms, as well as a general liberalization of market controls (Minns, John and Robert Tierney, The Labour Movement in Taiwan 2006). As these two economies matured into the twenty-first century and now nearly a decade after the Great Recession, two entirely different economic narratives describe the countries that were once unified. China is a relatively poor (GDP per capita $8113) and unequal (GINI index of 46.5, 2016 est.) yet rapidly growing economy characterized as a communist-capitalist hotbed for domestic entrepreneurship (Huang et al., Entrepreneurship in China 2016). Taiwan, on the other hand, is a much wealthier (GDP per capita $22,453) and more equal (GINI index 33.6, 2014) democratic economy suffering from the demographic crises and depressed entrepreneurial spirit associated with a high-income trap (Lin, Taiwan’s China Dilemma 2016). As a result, these two economies form the perfect contrast as entrepreneurial venues and give rise to a fascinating comparative economic question: how does the role of entrepreneurship differ in a faster-growing (China) versus slower-growing economy (Taiwan)? More particularly, how can Chinese policymakers avoid Taiwan’s economic maladies through innovation, and conversely, what kinds of innovation-friendly policies could help Taiwan climb out of its deeply rooted economic and demographic entanglements? I wish to explore these questions through an array of different perspectives via personal interviews this winter with Chinese and Taiwanese businesses, policymakers, and economic researchers. As I prepare for and eventually collect my qualitative data, I will corroborate any overarching conclusions with empirical quantitative data and regression analysis.