The Relationship between Unemployment and Entrepreneurship: Exploring the Mediating Effects of Ease of Doing Business and Digital Infrastructure : Quantitative research on the relationship between unemployment rates and entrepreneurial activity

Background: Unemployment increases the risk of income loss, lower wages upon reemployment, and adverse effects on mental and physical health, particularly for individuals of lower socioeconomic status. Long-term unemployment doubles the risk of mental illness and physical conditions such as heart attacks and strokes. Job loss can also lead to social isolation, as work is crucial to social engagement and status. Entrepreneurship is a solution to unemployment, fostering economic growth, innovation, and industry diversification. Purpose: This study examines how external enablers, specifically the Ease of Doing Business and digital infrastructure, influence the relationship between unemployment and the creation of new businesses. The research aims to understand how the external environment shapes entrepreneurial decisions among the unemployed by focusing on these factors. Insights from this study can inform policymakers of the importance of creating supportive conditions for entrepreneurship to address unemployment and promote economic growth. Method: This quantitative study employs mediation analysis based on Baron and Kenny's (1986) method to investigate the potential mediating effects of Ease of Doing Business and digital infrastructure on the relationship between unemployment and new business creation. The analysis involves multiple regression to test if there is a relationship between various indirect variables and a dependent variable. Conclusion: The results indicate a negative correlation between unemployment and new business registered. The study also highlights the significant mediating effect of the Ease of Doing Business on this relationship, emphasizing the importance of strengthening a supportive business environment to encourage entrepreneurial initiatives among the unemployed. However, the study finds limited evidence supporting digital infrastructure as a mediator, suggesting a need for continued investment in this area for broader economic develop