How does inclusive urban policy affect entrepreneurial behavior?—Evidence from the perspective of transaction costs and factor mobility

While cities serve as engines of economic growth, fostering opportunity and diversity, they also concentrate and exacerbate inequalities. This work on inclusive urban policy examines how governments can foster entrepreneurial vitality and create equal opportunity for all. This study leverages the variation in city-year exposure to China’s 2016 New Open Economy System Pilot Zones (NOESPZ) policy to examine whether and how inclusive urban policy influences urban entrepreneurial vitality employing a difference-in-differences (DID) approach. The findings indicate that NOESPZ policy enhances urban entrepreneurial vitality. This effect is particularly pronounced in larger cities, non-resource-based cities, and cities experiencing population inflows. Furthermore, the positive impact of NOESPZ policy on urban entrepreneurial vitality can be attributed to the reduction of transaction costs and the facilitation of factor mobility, including capital, talent, and technology. Overall, this study uncovers entrepreneurial dynamics from the perspective of city inclusiveness, offering valuable practical implications for fostering urban planning and sustainable and inclusive economic growth.