Entrepreneurship, Income Inequality and Public Spending: A Spatial Analysis into Regional Determinants of Growing Firms in Greece

One of the key determinants of economic growth, regional prosperity and sustainable development is entrepreneurship. This paper aims to identify proxies for entrepreneurship that can drive prosperity at the regional level, investigating the relationship between entrepreneurship and economic growth and development from a spatial econometric perspective in Greece. A spatial Durbin model was used across the 13 Greek regions for the period 2011–2016. Entrepreneurial activity, as measured by enterprise turnover, heavily affects economic development, employability and income inequality as depicted by gross domestic product per capita, unemployment and household income, respectively. The number of enterprises and research and development expenditure were not important factors. The latter supports a U-shaped relationship between public spending and economic growth. The contribution of this paper to the existing literature is the employment of spatial data models to identify determinants that may affect entrepreneurial development at a regional level, which in turn facilitates economic growth at a country (Greece) level. The advantage of spatial data analysis over conventional econometric models is that it takes into account regional proximity. The empirical findings may be used to potentially introduce appropriate policy measures to foster growth at the regional level, by capitalizing on the competitive advantages of each region.