Why Do Rural Firms Live Longer?
AbstractFor the first 13 years after entry, the hazard rate for firm exits is persistently higher for urban than rural firms. While differences in observed industry market, local market and firm attributes explain some of the rural-urban gap in firm survival, rural firms retain a survival advantage 25% greater than observationally equivalent urban firms. In competitive markets, the remaining survival advantage for rural firms must be attributable to unobserved factors that are known at the time of entry. One plausible candidate for such a factor is thinner markets for the capital of failed rural firms. The implied lower salvage value of rural firms suggests that firms sorting into rural markets must have a higher probability of success in order to leave their expected profits equal to what they could earn in an urban market.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 13085.
Date of creation: 02 Jul 2009
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, April 2011, vol. 93 no. 3, pp. 673-692
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
Rural; urban; entry; exit; survival; sorting; salvage value;
Other versions of this item:
- R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-AGR-2009-07-11 (Agricultural Economics)
- NEP-ALL-2009-07-11 (All new papers)
- NEP-CSE-2009-07-11 (Economics of Strategic Management)
- NEP-ENT-2009-07-11 (Entrepreneurship)
- NEP-HEA-2009-07-11 (Health Economics)
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