Religion and unproductive entrepreneurship: The role of risk aversion

Yi Zhang and Chun Liu

European Journal of Political Economy, 2021, vol. 70, issue C

Abstract: Institutions can shape the reward structure in the economy and thereby influence the allocation of entrepreneurship between productive and unproductive activities. This paper investigates the effect of religion, one important component of informal institutions, on unproductive entrepreneurship. Using a nationally representative survey on private enterprises in China, we find that religious entrepreneurs devote more of their resources, both in terms of money and time, to unproductive activities such as building social relations than their nonreligious peers. We further find that religion plays a significant role only in regions with weak regulatory institutions and/or for entrepreneurs vulnerable to institutional risks. Drawing on the close link between risk-aversion and religion, our results suggest that religious entrepreneurs engage in unproductive activities so as to reduce institutional risks in their business operations.

Keywords: Religion; Allocation of entrepreneurship; Risk aversion (search for similar items in EconPapers)
JEL-codes: D72 L26 P26 Z12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:70:y:2021:i:c:s0176268021000392

DOI: 10.1016/j.ejpoleco.2021.102038

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