Midwest Markets and Entrepreneurship

Conducting research on how government policies affect business startups and success, employment, human capital, and investment in nonmetropolitan markets.

Midwest labor, product and capital markets are atypically thin compared to markets on the east and west coasts. Agglomerations of customers, suppliers, and educated workers have been used to explain the century-long shift of population from rural to urban areas, the increasing concentration of patenting and entrepreneurship in cities, and the higher wages for urban than rural workers.

As a result, studies of entrepreneurship, innovation, and economic growth have focused most on the experiences in cities. Nevertheless, 29% of the Midwest population lives in nonmetropolitan areas compared to 15% for the nation as a whole, and so it is important to understand how thin markets function in a world where agglomeration economies are increasingly important, and how policy choices can enhance or diminish economic outcomes.

Who We Are:

Dr. John V. Winters

Dr. Donghyuk Kim

Kevin Kimle

Dr. Peter F. Orazem

Our Mission:

The Program for the Study of Midwest Markets and Entrepreneurship has a comparative advantage in conducting research on how government policies affect firm entry and success, employment, human capital, and investment in nonmetropolitan markets.

Our expertise is based on a growing body of studies that show how government policies, such as taxes, business incentive programs, and regulatory policies affect entrepreneurship and local economic growth. Analysis is identifying which factors or strategies succeed in Midwest markets facing the disadvantages of relatively small numbers of local customers, input suppliers, skilled workers and venture capitalists and how state education policies affect the growth and retention of skilled workers. We also present timely analysis to show how national policies and economic shocks, such as changing immigration policies, health insurance policies, or government responses to the pandemic affect local economies. These efforts are enhanced by the release of unique data, such as the border index, that shows how tax policies affect relative firm entry or employment growth on either side of state borders. We extend this research to policy-makers, businesses, and the public through media outlets, press releases, and blog postings.

What We Do:

The Program for the Study of Midwest Markets and Entrepreneurship will provide guidance to policy-makers, businesses, and the public on how policies affect firms, consumers, and communities in the Midwest, especially in small towns facing relatively small numbers of local customers, input suppliers, skilled workers, and venture capitalists.

Why the Center's Work is Urgent:

The Midwest has 21.7% of the U.S. population but 27.2% of the U.S. rural population. The percent of the Midwest population that is rural is 24.1% compared to the 19.3% for the rural share of the U.S. population. Much of the research on economic

development has documented the advantages of population density for attracting new firms, for increasing employment and wages, for attracting young and educated workers, for fostering innovation, and for attracting investors. What, then, fosters the sustainability of small towns and rural areas? It is not clear that copying what leads to growth in urban areas translates to rural growth, as each area has its comparative advantage. Instead, there is a need for identifying the comparative advantage of less densely populated areas and to pinpoint policies and growth opportunities that will sustain Midwest communities.

Compiling information on where and how some small communities have continued to thrive when others have declined is critical for the welfare of rural residents in the Midwest. How do some firms survive and grow when they face the challenges of sourcing inputs when there are few input suppliers, maintaining and growing sales when there are relatively few customers, hiring productive workers when there are thin populations of educated labor, and attracting investors when 80% of venture capital is in Boston, Silicone Valley, and Los Angeles.

The Iowa State Department of Economics has a long tradition of analyzing rural labor markets, beginning with Nobel Laureate T.W. Schultz’s pathbreaking analysis of rural wages, employment, and education. The current staff includes expertise in regional economic development, labor markets, education, entrepreneurship, economic policy, and rural economies.