Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

2016

Journal or Book Title

Journal of Regional Science

Volume

56

Issue

1

First Page or Article ID Number

72

Last Page

95

DOI

10.1111/jors.12202

Abstract

We test whether commonly used measures of agglomeration economies encourage new firm entry in both urban and rural markets. Using new firm location decisions in Iowa and North Carolina, we find that measured agglomeration economies increase the probability of new firm entry in both urban and rural areas. Firms are more likely to locate in markets with an existing cluster of firms in the same industry, with greater concentrations of upstream suppliers or downstream customers, and with a larger proportion of college-educated workers in the local labor supply. Firms are less likely to enter markets with no incumbent firms in the sector or where production is concentrated in relatively few sectors. The same factors encourage both stand-alone start-ups and establishments built by multiplant firms. Commuting decisions exhibit the same pattern as new firm entry with workers commuting from low to high agglomeration markets. Because agglomeration economies are important for rural firm entry also, policies encouraging new firm entry should focus on relatively few job centers rather than encouraging new firm entry in every small town.

JEL Classification

M13, R11, L26

Comments

This is the peer reviewed version of the following article: Artz, G., Y. Kim and P. Orazem. 2016. “Does agglomeration matter everywhere?: new firm location decisions in rural and urban markets” Journal of Regional Science, 56(1): 72-95, which has been published in final form at http://dx.doi.org/10.1111/jors.12202. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.

Copyright Owner

Wiley Periodicals, Inc.

Language

en

File Format

application/pdf

Published Version

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