Agriculture and Rural Economic Growth

By Deller, Steven C.; Gould, Brian W. et al. | Journal of Agricultural and Applied Economics, December 2003 | Go to article overview

Agriculture and Rural Economic Growth


Deller, Steven C., Gould, Brian W., Jones, Bruce, Journal of Agricultural and Applied Economics


The role of farm dependency and size on rural economic growth is examined with data from 2,240 nonmetropolitan U.S. counties for the period 1990-1995. A simple neoclassical model of regional economic growth is set forth with a central question relating to the role of agriculture on rural economic convergence. Traditional neoclassical theory predicts that poor rural areas should grow proportionally faster than rich areas. As interpreted in the academic literature and popular press, a preponderance of small family farms should enhance growth. Results suggest that a higher level of local dependence on production agriculture could lower growth rates.

Key Words: economic growth, production agriculture, rural development

JEL Classifications: O47, O51, Q18, R11

For decades, the notion of a healthy rural economy has been equated with a strong family-based agricultural sector (NCSF). Current research on the structure of the rural economy in the United States, however, documents that structural changes in the U.S. economy, and rural America in particular, have reduced the role of production agriculture (e.g., Drabenstott; Johnson; Walzer and Deller). Significant concerns have been expressed about the transition from small-scale "family-based" agriculture to larger "industrial-scale" farming (Ikerd 2000, 2001; NCSF).

Writing more than 50 years ago, Goldschmidt (1947, 1978) popularized the idea that the demise of the family farm and rise of corporate farms diminish the quality of life in rural America. Goldschmidt originally focused on the concept of large absentee-owner farms in California, the outflow of profits from local communities, low pay for farm laborers, and weaker production ties to the local community. Today, however, the notion of Goldschmidt has been greatly expanded and somewhat distorted within the literature to attack the trend in production agriculture away from the stereotypical family farm (Barnes and Blevins). In particular, farm structure and the theoretical relationships so explicit in Goldschmidt's original hypothesis have been blurred and misrepresented within the literature (Buttel; Gilles et al.; Green).

The argument widely expressed in the popular press, and to some extent in the academic literature, is that the "demise" of agriculture and traditional farming will greatly hinder the economic, social, and political vitality of rural America. Gebremedhin and Christy (p. 65) conclude:

The survival of small farms is important because of their social and economic role in the rural community. Small farms constitute the majority of farm enterprises in the country. Their survival implies more viable rural communities and a potential demand for public and private goods and services which have been overlooked over the years.

Ikerd (2000, p. 4) argues that the very soul of the rural community is dependent on the family farm.

As (farm) families were forced off the land, there were fewer people to buy groceries, clothes, and hardware in town, fewer people to go to schools and church, fewer people to serve in local government, join civic organizations, and rural communities withered and died.

The recent return to previous commodity price (income) support programs embodied in the 2002 Farm Bill with explicit caps on payments to individual farms was influenced by this logic. Arguments that commodity price support programs will help ensure a strong and healthy rural economy were commonly made in both the popular press and the halls of Congress. Again, a strong rural economy was equated with family farms.

In contrast, other researchers have argued that if farming is to generate sufficient levels of income to entice younger operators to remain in agriculture, the farm enterprise must adapt to changing times (Gardner). Throughout most of the 20th century, U.S. agriculture has generated lower than average incomes and a higher percentage of families living in poverty than nonfarm families.

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