Why Do Rural Firms Live Longer?

Li Yu (), Peter Orazem and Robert W. Jolly

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: For 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.

Keywords: Rural; urban; entry; exit; survival; sorting; salvage value (search for similar items in EconPapers)
JEL-codes: R00 (search for similar items in EconPapers)
Date: 2009-07-02
New Economics Papers: this item is included in nep-agr, nep-cse, nep-ent and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in American Journal of Agricultural Economics, April 2011, vol. 93 no. 3, pp. 673-692

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Related works:
Working Paper: Why Do Rural Firms Live Longer? (2011)
Journal Article: Why Do Rural Firms Live Longer? (2010)
Working Paper: Why Do Rural Firms Live Longer? (2009)
Working Paper: Why do rural firms live longer? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13085

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