Unemployment and entrepreneurship across high-, middle- and low-performing European regions

Abstract

ABSTRACT This paper examines the relationship between entrepreneurship and unemployment. Using Eurostat business demography data, a strongly balanced panel model pertaining to 148 European regions from 2008 to 2017 is assembled and a fixed effects regression technique is used to analyse the relationship between net business population growth and lagged unemployment. Results from the analysis show evidence of a negative relationship. However, when we stratify regions based on their economic performance, we find that this relationship is positive in higher performing regions and negative in lower performing regions, suggesting that push-factor or necessity-based entrepreneurship may be more prevalent in leading rather than lagging regions. Implications for policy are discussed. Results for the influence of industrial concentration and variety on entrepreneurship are also obtained.