Which Small Towns Attract Start‐Ups and Why?

AAEA members release new research in AJAE

It is very difficult for small towns to overcome the disadvantages of small populations.  However, there are some small towns that have larger numbers of local suppliers or customers or educated workers than other small towns, and these towns are still able to attract new firm entrants.  Rural economic development strategies that targeted these communities would be more successful than policies that tried to encourage firm entry in every town.

Georgeanne Artz (1974-2019), Peter Orazem from Iowa State University, Peter Han from U.S. Department of Housing and Urban Development, and Younjun Kim from Southern Connecticut State University published the article “Which small towns attract start-ups and why? Twenty years of evidence from Iowa” in the American Journal of Agricultural Economics, and dive in deeper.

Orazem says, “Since 2000, the only areas that consistently added new firms and increased employment were metropolitan areas.  In contrast, the communities losing the most employees and entrepreneurs were towns under 10,000 population.  But some of these small towns bucked the trend and were able to continue to attract new firm entry and employment.  These small towns were characterized by having atypically large levels of agglomeration and educated labor.”

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ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes two journals, the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices and the online open access publication series Applied Economics Teaching Resources. To learn more, visit www.aaea.org.

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