Churning in Rural and Urban Retail Markets

Abstract

Using data on the universe of taxable retail sales, retail firm start-ups, and retail firm exits in Iowa from 1992 through 2011, we test whether patterns of retail firm entry and exit are consistent with churning. Consistent with churning, the same factors that increase retail sales in a local market also increase new retail firm entry and either increase or do not affect retail firm exit. Evidence suggests that there is more churning in urban than in rural markets. Similar evidence is found using a sample of national firm entry and exit into local markets. If churning increases productivity growth, then the greater churning rate in urban markets is another source of agglomeration advantages in thick markets.

I will survive…but at what (opportunity) cost?: A spatial analysis of business survival and Jacobian externalities

“…Artz et al. (2020) found a similar pattern of rural and urban retail businesses: as populations increased survival rates declined. Yu et al.…”

“…Based on the work of Deller and Conroy (2016, 2017), along with Deller and Harris (1993) and Artz et al. (2020), we expect smaller counties to have higher survival rates because of lower opportunity costs of keeping a marginal or underperforming business in operation.…”

“…In addition to the income variables, we include the population to employment ratio similar to Artz et al. (2020). The ratio can be thought as another metric of local demand but also reflects if the county is a regional employment hub or more of a bedroom community.…”

“…Business dynamics, including firm birth, expansion, contraction, and death, capture different aspects of the regional economy's entrepreneurial characteristics (Artz et al., 2020; Hathaway & Litan, 2014; Van Leuven et al., 2022). Survival adds yet another aspect of business dynamics.…”

What side of town? How proximity to critical survival factors affects rural business longevity

“…While this is unfortunate for FRA business owners, the reality is that FRA establishments frequently experience high turnover in their respective sectors. Although retail establishment exits and entry rates are lower in rural areas than urban areas, the sector may benefit from high churn in terms of overall productivity with new entrants being able to cater to ever‐changing consumer tastes (Artz et al., 2020).…”