Can Beauty Raise Entrepreneurs’ Income?

Huang Jiuli; Tian Yuan

doi:doi:10.16538/j.cnki.jfe.2018.11.010

Summary

Entrepreneurship is one of the vital driving forces of the economic transformation and upgrading in China. The human capital of entrepreneurs plays a fundamental role in the entrepreneurial activity. Beauty is a special kind of human capital, which may have an impact on entrepreneurial performance. Individuals with beautiful appearance have higher bargaining power in various social interaction games, so they can strive for better opportunities, occupy more resources, and enjoy the so-called " Beauty Premium”. Related studies have generally found that beauty can improve the labor compensation obtained by labor force. In this paper, we focus on the " beauty economy” in the entrepreneurial labor market, and try to explore whether there exists the similar effect.　　According to the existing research, physical appearance affects entrepreneurial performance through many channels. First, beauty could affect the development of entrepreneurs’ knowledge and skills, since beauty requires self-management and self-control. Second, beauty may reflect the individual enterprising spirit and self-motivation, and affect the entrepreneurial motivation of entrepreneurs. Third, individuals with good appearance normally enjoy trust and encouragement from others, which will help them cultivate confidence and optimistic spiritual quality. The data used in this study are derived from the Chinese Family Panel Studies （CFPS） and the China Labor-force Dynamics Survey （CLDS）. The estimated results are as follows.　　The estimated coefficients of the core explanatory variable are significantly positive at the 1% level. For every one point increase in the appearance, female entrepreneurs’ income will increase by 12.8%, while male entrepreneurs’ income will increase by 14.3%. It is obvious that beauty can bring a higher income premium to men in the entrepreneurial market than women. In addition, the results reveal that the beauty premium in urban areas is significantly higher than that in rural areas. Considering that different industries and occupations will have an impact on the beauty premium, we control the fixed effects of industry and occupation. In addition, the fixed effect of region is also controlled in the model to consider the economic development and the cultural gap. Finally, people dress differently according to the season, which may interfere with the interviewer’s visual assessment of appearance, so we also control the time-fixed effect. After controlling the above fixed effects, the core estimated coefficients remain significantly positive at the 1% level basically. Also, after controlling the fixed effects of industry and occupation, the beauty premium of female entrepreneurs is no longer significant. This means that beautiful female entrepreneurs mainly choose to carry out entrepreneurial activities in industries and occupations that give higher beauty feedback.　　We also find that as the whole income increase, the effect of beauty on entrepreneurial income generally increases first and then decreases. In addition, we perform the estimation with CLDS data to make a robustness test, and hourly income and operational income of entrepreneurs are used as the dependent variable in the model to correct the income deviation. At last, the estimation of the instrumental variable is used to solve the problem of endogeneity.　　Compared with the existing literature, the marginal contribution of this paper contains two points. First, this is the first time for a Chinese paper to work on the relationship between physical appearance and entrepreneurial income. Chinese traditional culture thinks little of personal appearance, while this paper shows that physical appearance will affect the personal income of entrepreneurs. Second, this paper identifies the causal relationship between physical appearance and entrepreneurial income effectively.