Does the County-Level Business Environment Improve the Quality of Agriculture-Related Market Entry? Evidence from China

Xingyuan Yao, Jingyi Huang, Yufen Zhong, Qingfan Lin, Weiming Lin

Improving the quality of agriculture-related market entry is central to rural industrial upgrading, yet existing studies mainly measure entry quantity. The primary objective of this study is to assess whether the county-level business environment is associated with the structural quality of new agriculture-related entrants. Specifically, the study asks three questions: whether the association is positive; whether financial services, market connectivity, and human capital supply are consistent transmission channels; and whether the association varies with agricultural foundations, initial factor market conditions, and access to urban spillovers. Using Chinese business registration records and county-level socioeconomic data for 2010–2023, we construct a county–year panel and measure entry quality through capital quality, organizational quality, and value chain extension. Two-way fixed effects, double machine learning, fractional response models, robustness tests, and a supplementary instrumental variable diagnostic are applied. The preferred fixed effects estimate indicates that a 0.1 increase in the business environment index is associated with a 4.16 percentage point increase in the high-quality entry ratio; a one-standard-deviation increase corresponds to approximately 3.77 percentage points. The association remains positive under nonlinear and bounded-outcome specifications. Channel tests are consistent with financial, market connectivity, and human capital pathways, and the association is stronger in central and western counties, non-municipal districts, counties with stronger agricultural foundations, and counties with weaker initial financial and market conditions. Because the estimate becomes statistically insignificant after prefecture-by-year fixed effects are included, the findings are interpreted as robust conditional associations rather than definitive county-level causal effects.