The effects of unemployment on new firm formation revisited: Does space matter?

Abstract

This paper seeks to reconcile previous mixed results regarding the effects of unemployment on new firm formation. It is proposed that the relationship between unemployment and new firm formation is not stable over space but varies across regions as determined by regionally distinctive economic structures and new firm formation mechanisms. Unemployment may affect new firm formation differently even oppositely across disaggregated geographic units. It is therefore likely that unemployment stimulates new business creation in some areas while constrains it in other regions. Since ordinary least squares coefficients represent average effects, the unemployment coefficient could be positive, negative, or statistically insignificant as suggested by prior studies, depending on the relative strengths of the positive and negative influences of unemployment in a given industry, nation, or a period of time. Geographically weighted regression (GWR) techniques will be calibrated with rich county-level data to test the existence of spatially varying relationships between new firm formation and unemployment across US counties in 10 separate industries. This paper may greatly impact public policy-making and administration in taking into account entrepreneurial activities and impacts that may be location-specific and may spillover from one jurisdiction to its neighbours. Location-specific relationships may suggest that ‘one size fits all’ entrepreneurship policy does not exist in fostering quality entrepreneurship and promoting economic development.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 8 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.