Entrepreneurship and unemployment in Spain: a regional analysis

Abstract

Self-employment is usually associated with entrepreneurship and it is often promoted as a way of reducing unemployment. Our aim in this article is to analyse the relationship between self-employment and unemployment taking into account its spatial dimension. The entrepreneur activity in each region depends not only on its own endowment but the entrepreneurship environment may be exerted some influence. Regional Spanish data are used to obtain evidence about this relationship using a Spatial Durbin model to embed the spatial dimension. The results reveal that both the direct and indirect effects are relatively small. Further, if unemployment increases in a region, self-employment decreases. However, if unemployment grows in neighbouring regions, incentives for entering self-employment increase, implying that there is a ‘refugee’ effect (self-employment as an answer to the lack of wage employment).