Research

Publications

  1. Lyu, K. (2023). Social capital and self-employment dynamics in China, The Chinese Economy, 56:6, 459-485, 2023.
2. Liu, X., Jia, X., Lyu, K. et al. (2024). [The impact of low-carbon city pilot policy on urban energy transition...](https://link.springer.com/article/10.1007/s40974-024-00316-w), Energy, Ecology and Environment, 1-20, 2024.
  1. Liu, X., Jia, X., Lyu, K. et al. (2024). Towards sustainable development: The spatial spillover effects…, Environment, Development and Sustainability, 1-34, 2024.

Working Papers

  1. Job Market Paper: How Does Minimum Wage Affect Non-employer Business Establishments in the United States?
    With Frank Fossen
    Under Review; Presented at WEAI 100th Annual Meeting 2025, 45th BCERC 2025, REGIS Summer School 2024, SEA 94th Annual Meeting 2024, SBEJ 3rd Online Conference 2024

Abstract:
This paper investigates the impact of regional minimum wage increases on nonemployer business establishments in the United States. We develop a theoretical model of occupational choice motivating our empirical analysis. The effects of minimum wages are estimated using panel data analysis and an identification strategy that compares nonemployer establishments in contiguous counties across neighboring states. Our analysis employs data from the Nonemployer Statistics provided by the U.S. Census Bureau, spanning from 2001 to 2020. The findings indicate that a $1 increase in the minimum wage leads to a 0.5%–0.9% decrease in the number of nonemployer businesses, likely due to relatively more attractive wage employment. This shift is smaller in counties characterized by higher percentages of Hispanics, African Americans, Asians, and lower percentages of high school graduates. Conversely, higher minimum wages increase the number of nonemployers in the transportation sector as individuals are pushed into the gig economy, which is not covered by minimum wages. Further analysis based on various data sources from official statistics reveals that higher minimum wages discourage transitions from nonemployer to employer status and instead increase transitions from self-employment to wage employment and unemployment. Our findings add perspective to the debate on minimum wages by showing how this regulation affects nonemployers as an important part of their regional institutional environment.

Minimum Wage Paper

Contiguous Boundary Pair Counties with Minimum Wage in 2020

  1. The Effects of Local Taxes and Incentives on Entrepreneurship: Evidence from the Universe of U.S. Startups
    With Robert Fairlie, Frank Fossen, and Andrew Johnston
    Presented at WEFI, SOLE 6th World Labor Conference, WEAI 100th Annual Meeting 2025, 5th UCLA Price Research Conference 2025

Abstract:
This paper examines how local tax burdens and fiscal incentives shape entrepreneurship across the United States. Leveraging the Panel Database on Incentives and Taxes (PDIT), which combines detailed information on state and local tax regimes with the universe of U.S. startups, we estimate the effects of overall tax levels and targeted incentives on employer firm formation. Our findings show that higher total tax burdens reduce startup activity, while well-designed incentives—such as income tax credits and abatements—can partially offset these negative effects. These results highlight the importance of regional fiscal policy as a key determinant of entrepreneurial dynamics.

Total Tax Effect

Effect of Total Tax on Employer Startups

Income Tax Effect

Effect of Total Incentives on Employer Startups

  1. Targeted Poverty Alleviation and Unincorporated Entrepreneurship: Evidence from China
    With Shunfeng Song and Mengfei Zhang
    Under Review; Presented at WEAI 100th Annual Meeting 2025

    Abstract

    Unincorporated businesses serve as economic lifelines for low-income households when formal jobs are scarce. This study provides the first causal evidence that a large-scale anti-poverty program can promote unincorporated entrepreneurship. We focus on China’s Targeted Poverty Alleviation program, a landmark initiative combining precision targeting with multi-sector interventions. Using a difference-in-difference approach, we examine county-level business registrations (2010-2022) and household survey data (2010-2020). The program significantly increased unincorporated business entry by 6.9% at the county level and raised household business ownership by 2.75 percentage points. Three mechanisms drive these gains: spillover from large enterprises, expanded access to credit, and infrastructure improvements. Effects concentrate in counties with stable leadership and moderate corruption and are strongest in agriculture and among poor households, showing that well-governed, targeted interventions can redirect business ownership toward disadvantaged groups. Overall, our findings offer lessons for other low- and middle-income economies seeking to empower marginalized populations through small-scale enterprise.

  2. A Tale of Two Startups: The Loss and Gain of Startups in the U.S. Economy in the Pandemic
    With Robert Fairlie and Frank Fossen
    Under Review

    Abstract

    The COVID-19 pandemic delivered an unprecedented shock to U.S. business entry, with sharply contrasting effects on different types of startups. Using newly constructed administrative data from the Comprehensive Startup Panel (CSP), which covers the universe of U.S. business startups, we provide the first official numbers of the pandemic’s impact on both employer and nonemployer startup dynamics. We find that nonemployer startup formation declined substantially during the first year of the pandemic, while employer startups unexpectedly increased. Survival outcomes also diverged: the survival rate of nonemployer startups dropped markedly whereas employer startup survival remained largely stable, suggesting relative resilience. These findings reveal a pronounced compositional shift in U.S. entrepreneurial activity and underscore the importance of designing policy responses that address the distinct challenges faced by nonemployer firms in economic crises.

  3. From Vice to Venture: Evaluating the Impact of Smoking and Drinking on Self-employment in China
    Under Review

    Abstract

    Risky health behaviors, such as smoking and alcohol abuse, not only lead to preventable deaths but also affect workplace performance. Using data from the China Health and Nutrition Survey, this study examines how these behaviors influence the choice between solo self-employment, employer entrepreneurship, and paid employment. The study employs the instrumental variable approach, using cigarette and alcohol prices as instruments. The findings reveal that increased smoking and drinking behaviors reduce the likelihood of choosing self-employment, regardless of its type. Two primary channels of influence emerge from the analysis: the ‘individual channel,’ which indicates that such behaviors adversely affect health and decrease the likelihood of becoming an employer, and the ‘group addiction channel,’ which suggests that these behaviors boost social capital, thereby increasing the chances of business ownership.

6. The Effect of the Kansas Tax Reform on Self-Employment Hours Worked _With Ege Can, Hieu Pham, and Jingjing Yang_ _(Under Review; Presented at 117th NTA Annual Conference on Taxation 2024)_
Abstract

We examine the effect of the 2012 Kansas income tax reform on the weekly hours worked by self-employed individuals. Using a difference-in-differences method with data from the Current Population Survey and American Community Survey, we find that the reform led to a decline in weekly hours worked among self-employed Kansas residents relative to neighboring states. This outcome contrasts with the reform’s goal of promoting business activity. Reduced opportunities for risk-sharing and increased tax avoidance may be the factors that explain why lower taxes did not translate into greater entrepreneurial effort. These findings provide new evidence on the intensive margin impacts of tax policy on entrepreneurship.

7. The Impact of Green Finance on the Efficiency of Corporate Green Innovation: A Two-Stage Value Chain Perspective _With Xiuli Liu, Jing Cui, Jun Shen, and Qinqin Shi_ _(Under Review)_

Work in Progress

  1. Local Credit Supply Shocks Discourage Startups from Loan Applications
    With Rachel M. Flanigan and Frank Fossen
    (Reject and Resubmit)

  2. The Effect of the Kansas Tax Reform on Self-Employment Hours Worked
    With Ege Can, Hieu Pham, and Jingjing Yang
    (Presented at 117th NTA Annual Conference on Taxation 2024)

2. Online Gambling _With Ege Can, Mark Nichols, and Chaehyun Pyun_