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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

2009

Iowa State University

Rural

Economics

Articles 1 - 1 of 1

Full-Text Articles in Social and Behavioral Sciences

Why Do Rural Firms Live Longer?, Li Yu, Peter Orazem, Robert W. Jolly Jul 2009

Why Do Rural Firms Live Longer?, Li Yu, Peter Orazem, Robert W. Jolly

Economics Working Papers (2002–2016)

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 ...