Entrepreneurship Gap Due to Air Pollution: A Quasi-Natural Experiment in China

People have long been attentive to the critical issues of economic development and environmental conservation, recognizing their pivotal roles in achieving high-quality economic growth. Although there is substantial literature on the impact of economic development on the environment, relatively few studies have explored the impact of environmental degradation on economic development. This study aims to identify a pathway toward achieving high-quality economic development by examining the causal relationship between air pollution and entrepreneurship. The study utilizes panel data from 1,458 counties in China, spanning the period from 2000 to 2019, and employs a fuzzy regression discontinuity design using the Qinling Mountains-Huai River line as the threshold. The findings reveal that air pollution has the potential to hinder entrepreneurship. In the heterogeneity analysis, it was found that counties located along provincial borders are particularly vulnerable to the adverse effects of air pollution. Mechanistic analysis indicates that air pollution leads to increased labor mobility, heightened financial constraints, and decreased innovative activity, all of which collectively deter entrepreneurship. These findings highlight the importance of the ecological environment in entrepreneurial activities and provide insights for policymakers to promote public entrepreneurship through air pollution mitigation.