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The factors determining firm start-ups in French regions and the heterogeneity of regional labor markets

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Abstract

This paper investigates the determinants of business start-ups in the 22 French regions, considering four different sectors (industry, real estate, trade and services) over 1995–2004. The main innovation of the paper was to analyze regional differences in the decision to start a new business on a sector basis. Using spatial statistics and dynamic panel data methods, we estimate spatial regimes models. First, we show that regional factors determining new firm start-ups differ between sectors. Second, the estimation results are consistent with the existence of spatial heterogeneity. Finally, we observe persistence in start-up rates.

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Notes

  1. The Schumpeter effect predicts a negative effect of entrepreneurial activity on unemployment through the reverse causality relation. The use of lagged unemployment values as instruments to implement the GMM estimator chosen in our study therefore corrects this simultaneity problem.

  2. The percentage of graduates of higher education is only available over this time period. Furthermore, the estimation method requires a short time dimension compared with the individual one.

  3. The French National Institute of Statistics and Economic Studies uses the French industry classification to build the SIRENE data base. Its acronym is NAF (‘Nomenclature d’Activités Française, rév.2’) which corresponds to the ‘NACE rév.2’ classification used by the European Union.

  4. Other local indicators of spatial associations and their statistical significance are not computed here as the size of the sample (22) is too small for statistical inference.

  5. Corse is supposed to exhibit no spatial interaction with other regions.

  6. Estimates are obtained from the xtabond2 procedure, see Roodman (2009) and from the xtdpd procedure in STATA 13.

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Acknowledgments

We gratefully ackowledge the Editor-in Chief Martin Andersson and two anonymous reviewers for their helpful comments and suggestions having led to a substantial improvement of our paper.

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Correspondence to Marie-Estelle Binet.

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Binet, ME., Facchini, F. The factors determining firm start-ups in French regions and the heterogeneity of regional labor markets. Ann Reg Sci 54, 251–268 (2015). https://doi.org/10.1007/s00168-014-0653-x

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