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Which Small Towns Attract Start‐Ups and Why? Twenty Years of Evidence from Iowa

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  • Artz, Georgeanne M.
  • Kim, Younjun
  • Orazem, Peter F.
  • Han, Peter J.

Abstract

Using data on a sample of small Iowa towns consistently collected over two decades, we investigate how agglomeration economies, social capital, human capital, local fiscal policy, and natural amenities affect new firm entry. We find that human capital and agglomeration are more conducive to new firm entry than are natural amenities, local fiscal policy, or social capital. The impact of local fiscal policy is too small to overcome the locational disadvantages from insufficient endowment of human capital and agglomeration. A rural development approach that encourages firm entry in rural towns with the largest endowments of human capital and market agglomeration would be more successful than trying to raise firm entry in every town.

Suggested Citation

  • Artz, Georgeanne M. & Kim, Younjun & Orazem, Peter F. & Han, Peter J., 2020. "Which Small Towns Attract Start‐Ups and Why? Twenty Years of Evidence from Iowa," ISU General Staff Papers 202001010800001765, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:202001010800001765
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    Cited by:

    1. Steven Deller & Brian Whitacre & Tessa Conroy, 2022. "Rural broadband speeds and business startup rates," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(3), pages 999-1025, May.
    2. Guangsi Zhang & Xian Chen & Qiang Hu, 2025. "Can “Characteristic Town” construction protect the rural environment and enhance the rural economy? Perspectives on efficiency improvement and economies of scale," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-11, December.
    3. Younjun Kim & Peter F. Orazem, 2025. "What increases the urban–rural gap in firm entry rates?," Small Business Economics, Springer, vol. 65(2), pages 1141-1158, August.
    4. Zeballos, Eliana & Marchesi, Keenan, . "Comparing Food Sector Employment Headcount and Sales Data in the National Establishment Time Series Database to Federal Data," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, vol. 2022(Technical).
    5. Lin, Xin & Hui, Eddie Chi-man & Cong, Zhenglong & Shen, Jianfu, 2026. "Solving coordination failures: Collective land transfer rights and rural entrepreneurship," Journal of Development Economics, Elsevier, vol. 178(C).

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