An empirical note on entrepreneurship and unemployment. Further evidence from U.S. States
| Pages | 73-81 |
| DOI | https://doi.org/10.1108/JEPP-10-2015-0029 |
| Date | 11 April 2016 |
| Published date | 11 April 2016 |
| Author | Nicholas Apergis,James E Payne |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
An empirical note on
entrepreneurship and
unemployment
Further evidence from U.S. States
Nicholas Apergis
University of Piraeus, Piraeus, Greece, and
James E. Payne
J. Whitney Bunting College of Business,
Georgia College & State University, Milledgeville, Georgia, USA
Abstract
Purpose –The purpose of this paper is to extend the existing literature on the causal dynamics
between entrepreneurship and the unemployment rate (UR) in the use of the Kauffman Foundation
index of entrepreneurial activity.
Design/methodology/approach –Recently developed panel unit root tests with recognition of
cross-sectional dependence and panel cointegration/error correction modeling techniques are applied to
US States.
Findings –The results indicate that the rate of entrepreneurship, the UR, and real per capita personal
income are cointegrated. The panel error correction model reveals that bidirectional causality exists
among the variables in both the short run and long run. With respect to entrepreneurship, an increase
in the UR increases the rate of entrepreneurship, in turn, an increase in the rate of entrepreneurship
lowers the UR. Moreover, the results also show a positive bidirectional relationship between the rate of
entrepreneurship and real per capita personal income.
Originality/value –Unlike other standard measures of entrepreneurship, this is the first empirical
study of the causal dynamics between entrepreneurship and the UR using the Kauffman Foundation
index of entrepreneurial activity.
Keywords Entrepreneurship, US States, Panel error correction model, Unemployment rate
Paper type Research paper
1. Introduction
Recent studies on the causal dynamics between measures of entrepreneurship an d the
unemployment rate (UR) by Baptista and Preto (2007), Thurik et al. (2008), Golpe and
van Stel (2008), Faria et al. (2010), Carmona et al. (2010), Carmona et al. (2012),
Congregado et al. (2012), Koellinger and Thurik (2012), Parker et al. (2012), Gohmann
and Fernandez (2014), and Payne (2015a, b) have yielded mixed results for a variety of
countries and at the subnational level. Indeed, the causal relationship between
entrepreneurship and the UR may emerge through a variety of avenues. For instance, if
unemployment increases, indi viduals confronted with unempl oyment and few
alternative employment opportunities may turn to necessity-based entrepreneurial
activity. The success of such necessity-based entrepreneurship hinges in part on the
availability of financial resources (Hurst and Lusardi, 2004), the level of unemployment
benefits (Parker and Robson, 2004; Koellinger and Minniti, 2009), the tax and
regulatory environment (Bruce and Mohsin, 2006; Gurley-Calvez and Bruce, 2013;
Calcagno and Sobel, 2014), and the entrepreneurial talent and managerial acumen of
potential entrepreneurs (Alba-Ramirez, 1994).
Journal of Entrepreneurship and
Public Policy
Vol. 5 No. 1, 2016
pp. 73-81
©Emerald Group Publis hing Limited
2045-2101
DOI 10.1108/JEPP-10-2015-0029
Received 1 October 2015
Revised 14 November 2015
Accepted 15 November 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
73
Entrepreneurship
and
unemployment
To continue reading
Request your trial