Studying Employment and Entrepreneurship in Rural Areas of Iran (Spatial Econometric Approach)

Entrepreneurship, as one of the key drivers of economic development, plays a vital role in enhancing employment and ensuring the sustainability of rural communities. This study aims to examine the factors influencing employment development, with a particular emphasis on entrepreneurship in rural areas of Iran, employing a spatial econometric approach. In rural regions, challenges such as spatial inequality, low income, limited access to resources, and unequal employment opportunities have resulted in migration, poverty, and social isolation. Rural entrepreneurship, by leveraging endogenous resources, can alleviate these issues and contribute to economic growth, job creation, and social empowerment. Prior research indicates that entrepreneurship is effective not only in the agricultural sector but across all economic sectors (including industry, services, and mining), serving as a cost-effective alternative to traditional development models. However, in Iran, rural development programs are frequently confined to agriculture, neglecting spatial dimensions and locational interdependencies.

This research is descriptive-analytical in design, yielding applied outcomes. The study population encompasses all villages in Iran over the period from 2013–2023 . The employed model is spatial econometrics, incorporating tests such as Moran's, Lagrange multiplier, and maximum likelihood, while accounting for fixed effects and spatial heterogeneity, and utilizing the Spatial Autoregressive (SAR) method. The dependent variable is the employment share of the labor force among individuals aged 15 and older in major economic sectors. Independent variables include the entrepreneurship index (derived from a composite of data on registrations in the Superior Entrepreneur Festival by gender, education level, economic sectors, and generated employment), the economically active population, wage rate (adjusted by the producer price index), and capital asset acquisition credits (civil expenditures). The entrepreneurship index was computed via principal component analysis, with the spatial weight matrix normalized based on Euclidean distance.



Results from Moran's test confirmed a positive spatial correlation between employment and entrepreneurship across villages. In the SAR model, the spatial autoregressive coefficient is positive and statistically significant, indicating that a one-percent increase in factors affecting employment development in target provinces elevates the employment share in adjacent provinces by 0.39 percent. Furthermore, a one-percent rise in the entrepreneurship index boosts the employment share in target rural areas by 27 percent and in adjacent areas by 11 percent. The economically active population exerts a positive influence, with a one-percent increase elevating the employment share in target areas by 11 percent and in adjacent areas by 2 percent. Conversely, a one-percent increase in the wage rate diminishes the employment share in target areas by 17 percent and in adjacent areas by 9 percent. Civil credits also demonstrate a positive effect, with a one-percent increase raising the employment share in target areas by 16 percent and in adjacent areas by 11 percent.



Direct and indirect effects reveal positive spatial spillovers from entrepreneurship and the active population, alongside negative spillovers from the wage rate. These findings underscore that rural entrepreneurship, by emphasizing local resources and community participation, can mitigate poverty, curb migration, and guarantee sustainable development. Prevailing challenges in Iran encompass inadequate infrastructure, top-down planning, the absence of formal property ownership (deeds) for numerous villages, and coordination deficiencies among executive bodies. To address these, recommendations include adopting a bottom-up, endogenous approach; establishing a Ministry of Rural Development for enhanced coordination; issuing property deeds without restrictions based on population thresholds or Hadi plans to facilitate banking access; retaining the active population through income equalization between rural and urban areas; and prioritizing spatial policies on locations over sectors, with investments supplanting subsidies. Such policies can bolster spatial interactions and establish entrepreneurship as the primary engine of rural employment. Ultimately, this study emphasizes the imperative for integrating economic, social, cultural, and environmental dimensions in rural development to diminish regional disparities and elevate rural well-being.