Rural Economic Development

Whilst it is relatively easy to identify the impact of changes on the economy as a whole, definition and (even more) identification of effect within the rural economy is much more difficult. Issues related to definition of rurality are notorious, and according to Paul Hirst (1998: 110), “… sociologists and anthropologists have spilled lagoons of ink over it”. Even if precise boundaries are defined in some arbitrary way (using, for example, the census-based land-use division proposed) the problem of identifying cross-boundary economic flows poses an almost insuperable difficulty.(1)

Rural areas have traditionally been the residual areas that have not been included in the urban definition.  There is a huge difference between a rural community that is based on rural livelihoods and one where a large proportion of the population works in an urban area (particularly a main urban area), but happens to live in a rural area.  Communities that are rurally focused tend to be further away from urban centres, particularly main urban centres, and have poorer access to services.

Rural areas with high urban influence are projected to grow at twice the national average between 2001 and 2021 (34% compared with 16%).(2)

These areas often form the immediate urban: rural interface, and may eventually evolve into being fully urban. Peri-urban areas are places where people are key components – they are lived-in environments.

Economic development in rural regions has often been framed as a task inherently different from economic development more generally.  This has created policies and institutions that are not well-integrated with regional development activities in metropolitan regions.  It has also tied rural regions too strongly to agriculture, both focusing too much emphasis on this sector and by unjustifiably blaming agriculture for disappointing rural economic performance.

Rural regions are in many cases tightly linked to nearby metropolitan regions, approaching rural regions as self-contained economies will obscure policy choices.

The different composition of rural economies in the traded sector (exports) of the economy is an important factor in understanding rural economic performance.

Rural regions have largely similar economic compositions in the local (non-traded) economy, as we would expect.  Rural regions have strong positions in traditional manufacturing, though a lower base of advanced services.  Agriculture is, contrary to what some believe, a relatively small part of rural economies.  Even in countries with the highest reliance on agriculture, this sector accounts for only a modest portion of overall employment.

There are some common business environments weaknesses shared by many rural areas, often associated with low population density.

Many of the characteristics of business environments vary significantly among rural regions, and these collectively appear to be more important in explaining rural economic performance.

Rural economic development must focus on the unique strengths of each area, rather than concentrating on ameliorating generic weaknesses.

Rural regional economies need to better leverage the potential of their clusters located in nearby metropolitan areas.(3)

Rural regional alliances need to be formed so that resources can be pooled and the critical mass needed to develop and implement new economic development strategies can be created.

Characteristics of a rural economy

  • Resource based activities
  • Special location based activities
  • Activities requiring a rural environment
  • Activities at a distance from City Centres but serviced by local CBDs
  • Based on rural amenity
  • Different scales
  • Production orientated

If New Zealand cities were to recognise the significance of their economic geography then they would seek to understand their point of difference, their specialisation and their comparative and competitive advantage.

It is only when you start recognising that ‘No Region Can Really Be Successful Unless It ‘Specialises In Something’ and that ‘People With Experience And Expertise Are The ‘Scarce Resource’ of The ‘Post Industrial Economy’(4) that you are then able to develop an economic plan that can be readily implemented across the region at all levels as it will have a framework based on the region’s core comparative and competitive advantage.

It is important to understand that supporting rural economic development and lifting rural productivity and performance is not about protecting versatile soils and preventing sub-division.  It requires a far more holistic view and consideration of the production system.  While a particular soil may be capable of producing food, there are many factors that also need to be available for the land to be used for productive capacity.

The challenge facing rural regions is the need for chasing after a competitive edge in our rapidly changing global markets. To build this edge, we will need to (i) understand the region’s distinct economic assets, (ii) identify the best market opportunities for the region, and (iii) to develop a strategy.

The economic trends of the past decade show that globalization has transformed the rural development landscape. The swift moving global markets mean that rural areas cannot rely on old economic engines to fuel future growth.

New economic engines will need to be found to drive rural economic growth.



  1. Professor of Rural Studies, The University of Wales, Aberystwyth
  2. Life in Rural Paradise, Work, Knowledge and Skills in Urban/Rural New Zealand, Dr Rosemary Goodyear
  3. Competitiveness in Rural Regions by Christian Ketels, Michael E Porter, Economic Development America. Summer 2004
  4. Derek Kemp, Franklin Economic Growth & Innovation Framework

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