Why do rural firms live longer?

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Date
2009-07-03
Authors
Yu, Li
Jolly, Robert
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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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.

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