Firm entry and exit in Iowa, 1992 - 2004

Date
2008-11-01
Authors
Yu, Li
Jolly, Robert
Orazem, Peter
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Altmetrics
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Research Projects
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Economics
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Abstract

This paper uses the pattern of firm entry and exit to develop a classification system for industries. The classifications include urban-rural bias; long-term growth; and firm survival patterns. The first captures the fact that sector-specific economic growth may be favored in urban areas for some industries and may benefit from low population density for others. Some industries have experienced long-term expansion in firm numbers while others have experienced a decline. Finally, some industries are characterized by high rates of both entry and exit while others have low rates of both. A taxonomy classifying industries according to those three criteria is developed in this paper. The taxonomy is applied to the Iowa subset of the National Establishment Time-Series (NETS) database over the period from 1992 to 2004. County level entry and exit rates are shown to be positively correlated across nearly all 2 digit NAICS code industries. Industry growth is found to be biased against rural areas. Not all of the industries experienced expansion or have a positive net entry rate. Entry of new firms replaces old incumbent firms in each industry but to different degrees. Understanding firm entry - exit pattern can help design customized policies of fostering expansion of specific industries in Iowa according to their location bias, industry growth patterns and development dynamics.

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taxonomy, expansion, churning, entrepreneurship, economic development, entry-exit pattern, location bias
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