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Firm Entry and Exit in Local Markets: 'Market Pull' or 'Unemployment Push' Effects, or Both?

Author

Listed:
  • Martin Carree

    (Maastricht University [Maastricht])

  • Marcus Dejardin

    (UNamur - Université de Namur [Namur], UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

Firm entry and exit flows in the retailing and consumer services may be viewed as market equilibrating processes. Local markets with considerable market room and high unemployment may be thought of having high subsequent entry rates and possibly low exit rates. We examine this relationship and obtain empirical results for a range of industries in 563 Belgian municipalities. We show that, over a three-year period, (net) entry is positively affected by the presence of local 'market room'. We find a significant 'unemployment push' effect on entry in some industries, but also a significantly positive effect of unemployment on exit. This pattern possibly indicates a 'revolving door regime' in areas marked by unemployment where new entrants leave the market relatively soon after entry, or only crowd out local competitors without creating additional employment.

Suggested Citation

  • Martin Carree & Marcus Dejardin, 2020. "Firm Entry and Exit in Local Markets: 'Market Pull' or 'Unemployment Push' Effects, or Both?," Post-Print halshs-03220690, HAL.
    • Handle: RePEc:hal:journl:halshs-03220690
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03220690
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    References listed on IDEAS

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    1. Martin Carree & Marcus Dejardin, 2007. "‘Entry Thresholds and Actual Entry and Exit in Local Markets’," Small Business Economics, Springer, vol. 29(1), pages 203-212, June.
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    Keywords

    local development; unemployment; entrepreneurship; exit; entry;
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