Factors Affecting Employment with an Emphasis on Entrepreneurship in Rural Areas of Iran: A Spatial Econometric Approach

Document Type : Research Paper

Authors

1 Department of Economics, Payame Noor University(PNU), Tehran, Iran

2 Department of Geography and Urban Planning, Payame Noor University, Tehran, Iran

10.22059/jed.2026.408903.654634

Abstract

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.

Keywords

Main Subjects

References

 Chirwa, E., & Matita, M. (2015). Space, markets and employment in agricultural development: Malawi 
country report .https://uwcscholar.uwc.ac.za/items/2a5d3cce-3113-4f69-9d11-219316571ef2 
− Choi, E., Lee, K., & Lee, S. (2025). Micro-and Macro-Level Investigations of the Impacts of 
Transportation Infrastructure on Agricultural Gross Income in South Korea. Land, 14(9), 1779. 
https://doi.org/10.3390/land14091779 
− del Olmo-García, F., Domínguez-Fabián, I., Crecente-Romero, F. J., & del Val-Núñez, M. T. (2023). 
Determinant factors for the development of rural entrepreneurship. Technological Forecasting and 
Social Change, 191, 122487 .https://doi.org/10.1016/j.techfore.2023.122487 
− Do, Q. A., Le, Q. H., Nguyen, T. D., Vu, V. A., Tran, L. H., & Nguyen, C. T. T. (2021). Spatial impact 
of foreign direct investment on poverty reduction in Vietnam. Journal of Risk and Financial 
Management, 14(7), 292 .https://ideas.repec.org/a/gam/jjrfmx/v14y2021i7p292-d582007.html 
− Drucker, P., & Maciariello, J. (2014). Innovation and entrepreneurship. Routledge. 
https://rudyct.com/InovBis/Peter%20F.%20Drucker%20
%20Innovation%20and%20Entrepreneurship-1985.pdf 
− Dubey, S., Gupta, T. (2024). Determinants of Entrepreneurship in Rural India: A Microeconomic 
Investigation through Survey Research. Journal of Informatics Education and Research. Vol. 5 No. 
4. https://jier.org/index.php/journal/article/view/1224 
− Dzhangarasheva, N. B., Zhildikbaeva, A., & Yelemesov, ะก. (2023). Rational use of land of rural 
settlements. Problems of agro market, (2), 206-214. 10.46666/2023-2.2708-9991-20 
− Elhorst JP (2010). Spatial panel data models. In: Fischer MM, Getis A (eds) Handbook of applied 
spatial 
analysis, 
Springer, 
Berlin, 
Heidelberg 
and 
New 
York, 
377-407  .
https://link.springer.com/chapter/10.1007/978-3-642-03647-7_19 
− Elhorst, J. P., & Elhorst, J. P. (2014). Spatial panel data models. Spatial econometrics: From cross
sectional data to spatial panels, 37-93 . 
− Espinoza, C., Mardones, C., Sáez, K., & Catalán, P. (2019). Entrepreneurship and regional dynamics: 
The case of Chile. Entrepreneurship & Regional Development, 31(9-10), 755-767  . 
10.1080/08985626.2019.1565421 
− Espoir, D. K., & Ngepah, N. (2021). The effects of inequality on total factor productivity across 
districts 
in 
South Africa: a spatial econometric analysis. GeoJournal, 86, 2607
2638  .10.1007/s10708-020-10215-2 
− Faggio, G., & Silva, O. (2014). Self-employment and entrepreneurship in urban and rural labour 
markets. Journal of Urban Economics, 84, 67-85  .10.1016/j.jue.2014.09.001 
− Faghih, N., Bonyadi, E. & Sarreshtehdari, L. Comparison of the entrepreneurial motivation in different 
economic groups. J Glob Entrepr Res 11, 29–39 (2021). https://doi.org/10.1007/s40497-021-00268
z 
− Farhang, A. (2022). The effects of financial structure on life expectancy (Cup-FM 
approach). Journal of Development and Capital, 7(1), 121-134.doi: 10.22103/jdc.2022.19233[In 
Persian]. 
− Farhang, A. (2022). The effects of financial structure on life expectancy (Cup-FM 
approach). Journal of Development and Capital, 7(1), 121-134.doi: 10.22103/jdc.2022.19233[In 
Persian]. 
− Farhang, A. A., Jamali, J., & Dalir, E. (2024). Sanjesh-e asar-bakhshi-ye tassilat dar kasb-o-kar-e 
khanevigi-ye shahrestan-e Ardabil. Ta'avon va Keshavarzi, 13(52), 28-39. DOI: 
10.22034/ajcoop.2024.437769.1880 [In Persian]. 
− Farhang, A., & Dalir, E. (2026). Investigating Ways to Enhance the Effectiveness of Border 
Residents’ Cooperatives and Their Impact on the Development of Border Villages (Case Study: 
Ardabil Province). Village and Space Sustainable Development, 7(1), 21-48. doi: 
10.22077/vssd.2025.8900.1303[In Persian]. 
− Farhang, A., Younessi, A., Mansouri, N., & Jalilvand Nekari, A. (2025). Effects of economic 
openness, innovation and new technologies on the environment: A study of developing and 
developed countries. Journal of Environmental Education and Sustainable Development, 13(3), 
157–170. https://doi.org/10.30473/ee.2024.70297.2705 [In Persian]. 
− Farhang, A., Younessi, A., Mansouri, N., & Jalilvand Nekari, A. (2025). Effects of economic 
openness, innovation and new technologies on the environment: A study of developing and 
developed countries. Journal of Environmental Education and Sustainable Development, 13(3), 
157–170. https://doi.org/10.30473/ee.2024.70297.2705  [In Persian]. 
− Fortunato, M. W. P. (2014). Supporting rural entrepreneurship: A review of conceptual developments 
from research to practice. Community development, 45(4), 387
408  .10.1080/15575330.2014.935795 
− Grodzicki, T., & Jankiewicz, M. (2022). The role of the common agricultural policy in contributing to 
jobs and growth in EU’s rural areas and the impact of employment on shaping rural development: 
Evidence from the Baltic States. Plos one, 17(2), e0262673 .10.1371/journal.pone.0262673 
− Hamayangwe, M., Kumari, N.(2025).Exploring the drivers and barriers of entrepreneurship among 
rural women and youth.International Journal of Entrepreneurship and Business Development. 
8(3):390-399. 10.29138/ijebd.v8i3.3149 
− He, C., Lu, J., & Qian, H. (2019). Entrepreneurship in China. Small Business Economics, 52, 563-572  .
10.1007/s11187-017-9972-5 
− Hoseinzadeh, M., & Ja’Fari, H. (2017). Effective factors in rural entrepreneurship development: A 
case study of villages in the central district of Bardaskan city. Ukrainian Journal of Ecology, 7(4), 
330-339 .10.15421/2017_124 
− Huang, L., Huang, Y., Huang, R., Xie, G., & Cai, W. (2022). Factors influencing returning migrants’ 
entrepreneurship intentions for rural E-commerce: an empirical investigation in China. 
Sustainability, 14(6), 3682  .https: 14063682 
− Irawan,E, (2025).Arah Perkembangan Riset Kewirausahaan di Wilayah Pedesaan dan Perkotaan: 
Bibliometric Analysis. Jurnal Manajemen, Bisnis Dan Kewirausahaan. 5(3). 
− Irwin, E. G., Isserman, A. M., Kilkenny, M., & Partridge, M. D. (2010). A century of research on rural 
development and regional issues. American Journal of Agricultural Economics, 92(2), 522-553  .
8 
− Jani, S., & Nikpey Pesyan, V., & Safizadeh, S., (2020). Investigating the effect of tourism industry on 
employment in the provinces of the country with the approach of panel spatial econometrics, 
economic research and policies, 28(93), 233-266 . 
− Jin, Z. (2025). Unleashing local growth: The role of regional innovation and entrepreneurship in China. 
Journal of Accounting, Business and Finance Research, 20(1), 1-15  .
https://doi.org/10.55217/102.v20i1.885 
− Kamarudin, K. H., Untari, R., & Rashid, M. F. (2020). Sustaining rural livelihood through 
entrepreneurship and creative village development: Malaysia and Indonesia experience. Scientific 
Papers: Management, Economic Engineering in Agriculture & Rural Development, 20(3). 
https://managementjournal.usamv.ro/pdf/vol.20_3/Art35.pdf 
− Kania, I., Anggadwita, G., & Alamanda, D. T. (2021). A new approach to stimulate rural 
entrepreneurship through village-owned enterprises in Indonesia. Journal of Enterprising 
Communities: People and Places in the Global Economy .10.1108/JEC-07-2020-0137 
− Kavetskyy, I. (2023). Spatial variation of employment growth in Poland in 2005-2021  .
https://ideas.repec.org/a/ers/journl/vxxviy2023i1p433-449.html 
− Kianpoor, S., Farhang, A. A., & Shamsollahi, R. (2025). The effect of glass ceiling on women's 
entrepreneurship index in Iranian society (Capiola functions approach). Journal of 
Entrepreneurship Development, 18(1), 89-118. doi: 10.22059/jed.2025.380896.654404[In 
Persian].  Kianpoor, S., Farhang, A. A., & Shamsollahi, R. (2025). The effect of glass ceiling on women's 
entrepreneurship index in Iranian society (Capiola functions approach). Journal of 
Entrepreneurship Development, 18(1), 89-118. doi: 10.22059/jed.2025.380896.654404[In 
Persian]. 
− Korsgaard, S., Müller, S., & Tanvig, H. W. (2015). Rural entrepreneurship or entrepreneurship in the 
rural–between place and space. International Journal of Entrepreneurial Behavior & Research, 
21(1), 5-26 .10.1108/IJEBR-11-2013-0205 
− Koyana, S., & Mason, R. B. (2017). Rural entrepreneurship and transformation: the role of 
learnerships. International Journal of Entrepreneurial Behavior & Research, 23(5), 734-751  .
https://doi.org/10.1108/ijebr-07-2016-0207 
− Krugman, P. (1991). Increasing returns and economic geography. Journal of political economy, 99(3), 
483-499 .https://pr.princeton.edu/pictures/g-k/krugman/krugman-increasing_returns_1991.pdf 
− Kulkarni, S. M., Narkhede, P. A., & Jalgaon, J. (2016). Entrepreneurship and Rural development. 
Rural Development: Trends, Opportunities and Challenges in 21st Century, 23-30  .
https://www.researchgate.net/publication/313798944_Entrepreneurship_and_Rural_development 
− Kurniasih, N., Yusup, P. M., & Kuswarno, E. (2019). Strategy of Rural Entrepreneurship Potential 
Development in Pamarican Village Ciamis District Indonesia. Humanities & Social Sciences 
Reviews, 7(4), 291-296 .10.18510/hssr.2019.7437 
− Kushalakshi, D., & Raghurama, A. (2014). Rural entrepreneurship: a catalyst for rural development. 
International Journal of Science and Research, 3(8), 51-54. 
− Lebambo, M. (2019). The role of entrepreneurial policies in developing rural tourism entrepreneurship 
in South Africa. African Journal of Hospitality, Tourism and Leisure, 8(3), 1-21. 
− Lesage, J. P. (1999). A spatial econometric examination of China's economic growth. Geographic 
Information Sciences, 5(2), 143-153  .https://scispace.com/pdf/a-spatial-investigation-of-s
convergence-in-china-4jgqdqkb0t.pdf 
− Light, I., & Dana, L. P. (2013). Boundaries of social capital in entrepreneurship. Entrepreneurship 
theory and practice, 37(3), 603-624 .http://dx.doi.org/10.2139/ssrn.3519638 
− Lin, H., Li, Y., & Zhou, L. (2022). A Consociation Model: Organization of Collective 
Entrepreneurship for Village Revitalization. Systems, 10(4), 127 .10.3390/systems10040127 
− Lupenko, Y., Legorov, B., Nemchenko, V., Lagodiienko, N. (2024).  Theoretical foundations of 
human capital development in rural areas. Innovative officials of economic growth.  
https://doi.org/10.36887/2524-0455-2024-6-11 
− Muhammad, N., McElwee, G., & Dana, L. P. (2017). Barriers to the development and progress of 
entrepreneurship in rural Pakistan. International Journal of Entrepreneurial Behavior & Research, 
23(2), 279-295 .10.1108/IJEBR-08-2016-0246 
− Muryanti, M. (2018). Pedesaan dalam Putaran Zaman: Kajian Sosiologis Pedesaan, Petani dan 
Pertanian. Yogyakarta: Pustaka Pelajar . 
− Mwatsika, C. (2015). Entrepreneurship development and entrepreneurial orientation in rural areas in 
Malawi. African Journal of Business Management, 9(9), 425-436 .10.5897/AJBM2014.7552 
− Nejadian, M., Hosseini, R & Khodabakhsh, M. (2026). Designing Entrepreneurial Coaching 
Capabilities Model in Small and Medium-Sized Businesse. Journal of Entrepreneurship 
Development, 18(5), 106-145. DOI: http//doi.org/10.22059/jed.2025.396936.654539. [In Persian]. 
− Neves, D., & Hakizimana, C. (2015). Space, markets and employment in agricultural development: 
South Africa .http://hdl.handle.net/10566/4293 
− Pan, Y., Zhang, S., & Zhang, M. (2024). The impact of entrepreneurship of farmers on agriculture and 
rural economic growth: Innovation-driven perspective. Innovation and Green Development, 3(1), 
100093 .https://doi.org/10.1016/j.igd.2023.100093 
− Panzera, D., & Postiglione, P. (2022). The impact of regional inequality on economic growth: a spatial 
econometric approach. Regional Studies, 56(5), 687-702 .10.1080/00343404.2021.1910228 
− Partridge, M. D., & Rickman, D. S. (2008). Distance from urban agglomeration economies and rural 
poverty. Journal of Regional Science, 48(2), 285-310  .10.1111/j.1467-9787.2008.00552.x 

Journal of Entrepreneurship Development
Volume 19, Issue 2
July 2026
Pages 62-90

Files

Share

How to cite

Statistics