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Self-Employment and Economic Performance: A Geographically Weighted Regression Approach for European Regions

  • Katharina Pijnenburg
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    The self-employment rate includes entrepreneurs out of opportunity and entrepreneurs out of necessity. While the effect of opportunity entrepreneurs on economic development should be positive, there should be no or a negative effect of necessity entrepreneurship. We use a geographically weighted regression (GWR) approach to analyze whether the effect of self-employment on economic development is heterogeneous across European NUTS-2 regions. We find that regions having a significant positive effect of self-employment on economic development in the GWR estimation have, on average, a lower self-employment rate than regions with a significant negative effect. The concept of equilibrium rate of entrepreneurship is applied in an attempt to estimate a level of the self-employment rate from which relatively more entrepreneurs are self-employed out of necessity than out of opportunity. We find that in regions where the self-employment rate is above the equilibrium rate, self-employment has indeed a negative effect, while in regions where it is below the equilibrium rate the effect is positive.

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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.416595.de/dp1272.pdf
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    Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1272.

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    Length: 33 p.
    Date of creation: 2013
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    Handle: RePEc:diw:diwwpp:dp1272
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