Abstract
Understanding the ability of a local market to support a particular type of establishment is a prerequisite to designing effective development strategies. While several factors contribute to the vitality of the local retail market, the most fundamental factor is the relative size of the market in terms of potential customers. A commonly applied technique to assess the ability of a community to support various business activities is the estimation of demand threshold using simple count data models. However, due to the presence of excessive zeros in the dependent variable, this study uses Hurdle Poisson and Zero Inflated Poisson (ZIP) count data models and estimates demand threshold for twelve retail commercial sectors for 2,201 counties in the U.S. The results show that the demographic characteristics of the county population and its remoteness are significant factors determining the number of establishments in a county. The results from this study may be used by local economic development practitioners and entrepreneurs to retain, promote, and attract retail commercial businesses in the local communities.
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Notes
The simple Poisson and Negative Binomial variations of these models are also tried. While Poisson models results are inferior to ZIP model but the NB models failed to converge for several retail sectors. Hence, it is decided not to report the results.
As suggested by a reviewer an interaction term (income *metro) was included in both models and for most of the regressions the coefficient had a strong and negative impact on the dependent variable. However, its inclusion made the ‘metro’ variable weak and positive which is contrary to conventional hypothesis. Hence, the results are not reported.
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Earlier version of this paper was presented at the 71st International Atlantic Economic Conference, Athens Greece. March 16–19, 2011
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Chakraborty, K. Estimation of Minimum Market Threshold for Retail Commercial Sectors. Int Adv Econ Res 18, 271–286 (2012). https://doi.org/10.1007/s11294-012-9354-3
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DOI: https://doi.org/10.1007/s11294-012-9354-3