Increasing population and very modest economic growth are major concerns in regional economic development. There have been many fluctuations and inconsistencies in regional economic growth since the Second World War. Policy makers started to pay attention to the possibility of increasing entrepreneurial activities in the Northeast region after realizing that manufacturing firms alone cannot meet the employment needs of local residents. The United States has focused on providing more support to entrepreneurs to have a competitive economy. Entrepreneurship is important for economic activities such as employed resources, labor and capital goods pricing, organizing production, and marketing goods. This study develops relationships among population density, employment, per capita income, and new firm formation and self-employment as measures of entrepreneurship, assuming that these variables can be determined jointly.;The main objective of the study is to identify and estimate the impacts of entrepreneurship in the economic development of the Northeast region. A theoretical model is developed using endogenous growth theory. This model's emphasis is on the role of entrepreneurship in economic growth. In a theoretical conclusion the relationship between entrepreneurship and economic growth can be seen in two ways: entrepreneurial effect and production effect. At a social optimum, the entrepreneurial effect is stronger than the production effect and shows an increase in economic growth as entrepreneurship increases. For empirical analysis, two methods are used: non-spatial model and spatial model. The non-spatial model of this study is derived from the three-equation simultaneous model of Deller et al. (2001).The spatial model is derived from a Spatial Durbin Model with four equations. The study used the non-spatial simultaneous equations model to estimate the relationship using Three-Stage Least Squares (3SLS).;The empirical results of this study on the relationship between entrepreneurship and economic development are an extension that incorporates the simultaneous relationship of new firm formation and self-employment in the economic development of the region. Another contribution of this study is using the spatial Durbin model technique. New firm formation as a measure of entrepreneurship plays a significant role in the economic development of the Northeast region of the Unites States. Although, self-employment also contributes in the process of economic development, new firm formation has stronger impact on economic development than self-employment. The results of self-employment growth are weak in the empirical models. Basically, it is possible that entrepreneurship can enhance regional economic development.
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