Academic journal article Economic Review - Federal Reserve Bank of Kansas City

The New Power of Regions: A Policy Focus for Rural America-A Conference Summary

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

The New Power of Regions: A Policy Focus for Rural America-A Conference Summary

Article excerpt

Rural policy should encourage more regional partnering among rural firms, communities, and governments. That was the conclusion reached by a dozen policy experts and 200 rural leaders from throughout the nation who gathered at the Center's third annual rural policy conference, The New Power of Regions: A Policy Focus for Rural America. The conference was also sponsored by the bank's Community Affairs Department.

The conference began by exploring why regional synergies are important in seizing a new frontier of rural opportunities. Participants were quite upbeat about that frontier, with considerable discussion of pharmaceuticals grown in fields, advanced manufacturing, and e-commerce.

But participants were even more convinced that such opportunities will develop only with new models of partnering-across firms and across governments. Case studies of pharmaceutical farming in Iowa and new business initiatives in the Four Corners region underscored the point. In the final session, policy experts and conference participants agreed that building new regional partnerships needs new policy directions. This will require new efforts by leading federal agencies like the US. Department of Agriculture, by state and local governments, and by public institutions, such as land grant universities and community colleges.


The first session of the conference examined why regional synergies play such a big role in shaping the outlook for the rural economy. John Quigley concluded that "agglomeration" economies are part of the essential tug and pull of the rural economy. Rural America enjoys some competitive advantages inherent in its large land mass and lack of urban congestion. Low land costs, for example, have been a huge rural asset as manufacturing companies have adopted continuous assembly production practices and then gone searching for low-cost land to locate sprawling plants. But the other force at work is rural America's low density, a liability in the new economy where firms often look for large pools of skilled labor or similar firms with whom to share technology or best business practices.

Quigley noted that low-cost land has been especially telling for the rural economy over the past couple of decades. Over that time, manufacturing's share of rural incomes has swollen to 28 percent, more than 10 percentage points higher than in urban areas. Thus, manufacturing is much more important to the economic well-being of rural areas than of urban areas, a gap that has steadily widened.

On the other side of the coin, rural areas have trailed in attracting service firms. Here, rural America's low population density hurts growth, making it difficult for firms to find the necessary threshold of customers. In addition, rural areas have more limited labor pools, and labor is relatively more important in services than either manufacturing or agriculture.

Agglomeration economies also appear to be quite important in spurring both entrepreneurial activity and knowledge-based industries. Quigley noted that such synergies had been observed for more than 75 years, and "knowledge spillovers" are one key to explaining many economic trends of the 1990s, including the emergence of regions like Silicon Valley.

Looking ahead, Quigley pointed to two ways rural America could build more agglomeration. One is technology. Telecommunication technology mitigates much of the economic liability of low density and distance from markets. Many of the synergistic effects of density and "faceto-face" contact can be replicated through virtual networking, teleconferencing, and other electronic means.

The other way is public policy. Quigley argued that there are sound foundations for both "place-based" and "people-based" policies to help rural America seize new opportunities. Place-based policies (which focus mainly on infrastructure) might be very helpful in overcoming rural America's low density. …

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