Entry and exit: a county-level analysis
A simultaneous model of firm entry and exit is estimated for the counties of Great Britain. This is based on a simple model of entrepreneurial choice augmented by labour market and local economic infrastructure influences. A formal test of recursiveness is carried out and the system is found to be non-recursive. The rate of exit is found to be the sole influence on the entry rate, while exit is influenced by entry, the rate of change of unemployment, and the availability of managerial skills in the local area. The results are compared with an estimation which fails to allow properly for simultaneity, and policy implications are discussed.