Understanding the long-term effects of Keju: The case of entrepreneurship in China

We show that contemporary differences in entrepreneurship within China can be traced back to Keju, a civil service examination system for selecting state bureaucracy in the age of monarchy. Combining current individual-level survey data with historical prefecture-level data on the density of Jinshi (the highest qualification in Keju) during the Ming-Qing period, we find that individuals in prefectures with high Jinshi density exhibit a lower probability of participation in entrepreneurial activities today. Evidence from a range of identification methods suggests that the relationship is robust and causal. We also argue that the Keju tradition could influence entrepreneurship through its effect on individuals' propensity to work for the state and risk aversion. Finally, we show that persistence is lower in prefectures with higher political violence during the Cultural Revolution and economic openness presently.