What matters for lagging regions? The role of self-employment and industrial diversity in distressed areas

Abstract

Previous research suggests that having more self-employed or entrepreneurs can contribute to higher levels of economic growth in distressed areas. Additionally, self-employment in certain industries may be more beneficial to growth. Other research has linked industrial diversity to entrepreneurship and regional growth, especially in urban areas. However, the relationship between industrial diversity, self-employment, and growth in lagging or distressed regions is less clear. To examine these linkages in distressed areas, we first identify a group of distressed counties based on historic data. Then, using detailed industry-level self-employment data, we appraise whether having more self-employed from certain industries is associated with regional growth. We also analyze the relationship between industrial diversity and overall growth and the propensity to be self-employed. The results suggest that having more self-employment overall and in some key industries is associated with more employment growth in distressed counties. We also find that the relationship between economic diversity and self-employment varies by industry and region.