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

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2020-01-01
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Artz, Georgeanne
Artz, Georgeanne
Orazem, Peter
Kim, Younjun
Orazem, Peter
Han, Peter
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Economics
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Economics
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.

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This article is published as Artz, Georgeanne M., Younjun Kim, Peter F. Orazem, and Peter J. Han. "Which Small Towns Attract Start‐Ups and Why? Twenty Years of Evidence from Iowa." American Journal of Agricultural Economics (2020). doi: 10.1111/ajae.12144.

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