Relationship Between Unemployment and Entrepreneurship Dynamics in the Czech Regions: a Panel VAR Approach

• Main Author: Ondřej Dvouletý
• Format: Article
• Language: English
• Published: Mendel University Press 2017-01-01
• Series: Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis
• Subjects: Entrepreneurial activity; unemployment rate; necessity entrepreneurship; self‑employment; Vector Autoregressions (VAR); impulse response function
• Online Access: https://acta.mendelu.cz/65/3/0987/

Investigation of the relationship between unemployment and entrepreneurship still does not provide conclusive results and scholars argue that the relationship needs to be further investigated. In the Czech context, the knowledge about entrepreneurship is still underdeveloped. The purpose of this paper is to investigate the dynamics of the relationship between unemployment and entrepreneurship, applying the methodology used by Koellinger and Thurik (2012) with usage of the quarterly data for the Czech NUTS 3 regions for the period of years 2003 – 2014. Collected sample of 672 region‑quarter observations was obtained from the Czech Statistical Office. Estimated panel vector autoregressive (VAR) models with impulse response function supported hypothesis assuming a positive relationship between unemployment and entrepreneurship, operationalized as annual growth in registered business activity. Obtained results also showed that after the shock in unemployment, dynamics of entrepreneurship increased above its initial level after two years, concluding that it may take up to two years before positive effects on entrepreneurship reveal. This finding provides value for entrepreneurship policy makers. Based on the obtained results author suggests to support entrepreneurial activity, especially during the times of higher unemployment rate.