Entrepreneurship and Unemployment in Türkiye: Regional Evidence on Schumpeter and Refugee Effects Under Economic and Financial Constraints

Sustainable regional development requires understanding how entrepreneurship and unemployment co-evolve. This study investigates this relationship across Türkiye’s 26 Nomenclature of Territorial Units for Statistics 2 regions over the 2007–2024 period, testing the Schumpeter (pull) and Refugee (push) effects with controls for regional economic and financial determinants. Using the Dynamic Common Correlated Effects estimator, which accounts for cross-sectional dependence and slope heterogeneity across regions, the analysis provides evidence supporting both effects, while revealing that neither effect emerges instantaneously. The Schumpeter effect operates with an approximately one-year lag, reflecting the time new ventures require to complete organizational formation and generate net labor demand, with a creative destruction dynamic appearing from the second year onward. The Refugee effect materializes within one to two years, as unemployed individuals exhaust formal job search alternatives before turning to necessity entrepreneurship. Critically, the findings identify banking sector intermediation efficiency, rather than aggregate credit volume, as a more consistent financial channel for sustainable labor market outcomes, and document a pattern consistent with jobless growth, in which regional output expansion has not systematically translated into unemployment reduction. These results call for employment- and entrepreneurship-linked policy instruments that are timed to the lag structure of both effects and targeted at transforming necessity-driven activities into sustainable, high-value-added structures, rather than merely incentivizing firm entry. Aligning regional financial intermediation with employment creation can foster long-term socio-economic sustainability and promote sustainable regional development.