Duration: 10/01/2007 to 09/30/2012

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

Rural communities are comprised of the people, their businesses and farms, their organizations and governance. The quality of rural life both affects and is affected by the movement of people into and out of rural communities, the evolution of agriculture and industry, local social organization, and public policy. The future of rural America depends on decisions made by citizens, businesses and government officials at all levels. While much of the activity is local, many of the challenges and issues are common across counties and states. Citizens and policymakers alike are in need of high-quality, timely research and outreach to help them understand the forces shaping their communities and the role of public policy in addressing these changes.

We propose to reorganize ourselves to undertake a new multi-state regional research project that considers four interdependent themes that cause and are caused by rural change. Broadly, the four themes concern rural labor markets, rural industry, rural governance and how each both impacts and is affected by the rural quality of life. Stakeholders in rural communities have identified these themes as important for rural people and places.

Imagine a fictional rural town called Lake Hyatt that has undergone significant changes over the past several years. What were once summer cottages are being converted into year-round homes with owners retiring into the area, raising concerns for both longtime residents and newcomers about quality of life. What were once working forests are now being set-aside for recreational use, changing the structure of local businesses. Historically well paying lumbering and wood processing jobs are being replaced with lower paying service jobs, and these labor market changes influence commuting patterns and family well-being. At the same time, the demands on local governments are changing as these new in-migrants are placing demands on services and may also be running for elected office. These changes in fictional Lake Hyatt illustrate the linkages of the four objectives of the proposal - amenities and quality of life influencing residential location choice, changing industry structure altering jobs and earnings, and local government impacts in terms of revenues, services and the capacity of local leaders. The types of changes and their consequences differ greatly across the rural communities of America, but what is universal is the interrelationships among these changes and the need for research and policy to help rural communities adapt and thrive.

Concerning the first theme about rural labor markets, agricultural economists and rural sociologists with significant experience studying rural labor issues will collaborate on investigations into the causes and consequences of rural poverty, low skill/low wages, the rural "brain drain," commuting, and migration. These challenges are felt in all states. Furthermore, the issues of interstate commuting and interstate migration are particularly relevant for multi-state collaboration. We also propose to investigate new ways to enhance rural labor quality through education, training, workforce development, and entrepreneurship and creative class strategies appropriate for rural areas. These alternatives are also likely to affect farm household labor supply and off-farm employment opportunities. Market mechanisms, including labor markets, can only facilitate the employment of people who have things to sell. Markets cannot provide incomes to people who cannot work. Non-market mechanisms, such as publicly provided education or income redistribution are needed when and where markets fail. If we do not continue to improve our understanding of how rural labor markets work and how they fail, we risk continued or worsened suffering, unemployment, rural out-migration, and poverty.

On the other side of the rural labor market is industry. As the President of the Nevada Farm Bureau recently said, "We still don't know just how we are supposed to go about attracting 'high-wage' jobs to town." Industry turnover is a fact of life. The question is, what businesses are a good fit for rural communities today? Thus, agricultural economists with experience studying rural industry propose to investigate solutions to sources of fluctuations in employment demand. In particular, because rural industry is sparse, with long distances between enterprises that may be linked through purchases and sales, we propose to measure the maximum distance thresholds between linked establishments, and to study the causes and consequences of deindustrialization, industry restructuring, and industry clusters. We will also include self-employment, entrepreneurs, innovative behaviors, and emerging industries such as bio-fuels and other interdependencies between farming and the rest of the rural economy.

A recent paper by the IBM Center for the Study of Government summarizes the environment surrounding government in the United States. "A concern for efficiency is being supplanted by problems of governance, strategy, risk management, the ability to adapt to change, collaborative action and the need to understand the impacts of policies on society" (Breul, 2006: p. 7). These are huge issues with which government is struggling to respond on several fronts. Citizens have shown increasing impatience with governments that have not moved quickly enough to respond to the challenges by providing their own "fixes" through support for term limitations and tax and expenditure limitations, initiatives on constitutional amendments and direct statutory approvals, and founding of new governments, both general purpose and single purpose special districts.

Research on these challenges and responses has concentrated on federal and state government, but these issues are also the milieu of local governments, the smallest of which lack professional expertise and fiscal resources that might allow more proactive responses. Local governments currently face a confluence of several trends which are challenging the ability of local officials to manage budgets and meet the demands of citizens for local government services. Agricultural economists and sociologists who are adept at studying issues of local public finance are poised to collaborate in this project to investigate the following challenges confronting so many rural communities: fiscal crisis, fragmentation, zoning and land use, property taxation, tax expenditure limitations and term limits. The same team has made progress investigating innovative solutions to governance problems, such as e-governance and the potential for local community networks to enhance local public good and service provision at lower cost.

Our images of rural areas are still dominated by pastures, working forests being actively harvested and mountainous landscapes dotted with mines. For much of the past century, rural communities have struggled with population and employment loss, high rates of poverty and a paucity of financial resources to provide basic services to residents. Not all rural communities are facing these pressures, however. Many communities are experiencing high rates of population, income and employment growth. Most of these communities are heavily endowed with natural amenities. Rather than extracting natural resources for external markets, these communities have begun to build economies based on promoting environmental quality and a high quality of life. This shift in rural economies from extraction of natural resources to promotion of quality of life and natural and cultural amenities in particular is apparent throughout Europe and North America.

Prior research has demonstrated that amenities and quality of life strongly influence the economic growth and development of rural areas. The research is also clear that natural amenities are to an extent a necessary but not sufficient condition for growth. Rather, there must be economic institutions in place that are able to capture economic activity. For examples, pristine lakes cannot capture economic activity unless there are developed camping sites, marinas and other recreational-based businesses in place. In other words, the type of amenity in place, natural or built, matters.

Given the growing importance of natural amenities in some high environmental quality rural regions, a critical issue is the interdependence between natural amenities and the regional population that simultaneously depends on and threatens the ecosystem and its natural amenity services. Human impacts from population growth and land development can generate congestion and ecological degradation that degrade the very amenities that attract people to the region. Examples include population growth and low density development around national parks in the mountain west, which increase land fragmentation and reduce lowland habitat for wildlife. On the other hand, population growth may lead to additional investment in the provision of natural amenities and additional support among residents for conservation policies that protect natural amenities.

Jobs, market goods, opportunities, amenities, and social life are woven together in rural places to determine rural quality of life. This project would expand the successful collaboration investigating the significance of environmental issues, farm sector multi-functionality, rural health care, lake tourism and other rural amenity issues in rural development. We need to understand how to ensure the provision of non-market rural amenities to achieve sustainable rural development. If not, we risk suffering the consequences of rural sprawl, 'slash and burn' rural economic development, resource overexploitation and environmental degradation: community impoverishment, out-migration, and community abandonment.

This project requires social science. Feasibility depends on the degree of innovativeness and the quantity and quality of scientific method applied to each topic. Because the problems are common across states, we enjoy efficiencies and returns to scale by collaborating. We can cover multifaceted issues by parsing the facets and specializing, then meeting to organize the whole. Although many challenges are the same, states are also different. This interstate variation helps to statistically identify relationships between dependent and explanatory variables. Thus, interstate collaboration helps provide more suitable cross-section data bases. Multi-state collaboration also lends valuable support to innovation, which is by definition the application of an existing invention to a new purpose. By interacting in a multi-state group we achieve intellectual synergies. By incorporating a multidisciplinary approach, the project will integrate the insights and methods of agricultural economists, rural sociologists, demographers and regional scientists in order to provide a more complete analysis of the changes occurring in rural communities. The multidisciplinary approach of the project is evidenced not only by representation of different disciplines on the team, but more importantly, by the fact that many of the participants employ multidisciplinary approaches, have training in multiple fields, work with coauthors in other disciplines and publish in journals in a range of social science disciplines including economics, sociology, regional science, public policy and demography.

The research objectives of this project are highly consistent with the goals of CSREES and other organizations concerned with rural communities. Improving human well-being and community quality of life represent two fundamental goals of development efforts. Thus, an understanding of attributes and forces that enhance or detract from individual and household well-being and/or from community quality of life is important for guiding decision-making on policy. The research will lead to increased knowledge of the forces impacting rural communities in terms of labor markets, industry, governance, and quality of life. The impact of this research will be seen in better understanding among community leaders and citizens of the dynamics of labor markets and businesses and their effects on rural communities. Without this research, decision makers in communities will be more likely to base decisions on outdated or imprecise notions of the causes of changes in the economic and fiscal situation of rural communities. Without understanding the causes of local fiscal stress, it is difficult for citizens and policy makers to make informed decisions on taxes and expenditures. Finally, without better understanding of the role of quality of life in location decisions, communities would be less able to guide their economic development efforts and sustain themselves in the face of change.

Related, Current and Previous Work

The team of researchers associated with the proposed project and its predecessors - NE-1011 and NE-162 - is uniquely well-positioned to explore the proposed research themes. A CRIS Search produced 50 research projects focusing on rural labor markets and industry. Of these, nearly 60 percent (29/50) were conducted by members of NE-1011. Two important forms of cross-state cooperation are evident in these projects. First, a large share of the specific research activities and outputs were conducted collaboratively across states. For example, researchers in Missouri, Iowa, Wisconsin, Pennsylvania, Nevada, Texas, and South Carolina, and Iowa jointly developed a common modeling strategy for analyzing the economic and fiscal impacts of county level labor market shocks - the Community Policy Analysis System (COMPAS). A book edited by three Project members summarizes application of these COMPAS models to various public policy issues in each of these states (Johnson, Deller, and Otto, 2006). These models are well-suited to facilitating measurement of both the spatial impacts (i.e., shifts in locations of establishments and jobs) and the workforce implications (shifts in employment opportunities among industries) likely to follow industrial restructuring in rural areas.

A second important type of cross-state cooperation manifests itself in the form of research methods and approaches that have been developed in one state that were subsequently employed by researchers in other states investigating similar phenomena. For example, Renkow (2003, 2004, 2006) developed and implemented an analytical framework for breaking down county employment growth into changes in four components: in-commuting, out-commuting, unemployment, and labor force size (inclusive of net migration flows). This work was based on the fiscal and economic impact models of Johnson, Scott, and Ma (1996); Swenson and Otto (2000); and Yeo and Holland (2000). In turn, Renkow's model was implemented (with some modification) by Davis and Bachewe (2004). These empirical analyses have employed decennial census data for their implementation, but are equally amenable to using alternative data collected more frequently (e.g., annually). They generally confirm that changes in commuting flows are a dominant means by which labor markets adjust to employment shocks. Other work by researchers associated with the proposed project have employed different methods to examine the same phenomenon (Barkley, Henry, and Warner, 2002; Shields and Swenson, 2000), but have come to similar conclusions. This project will build on the previous work to further understanding of ongoing and projected changes in labor markets and industrial structure in rural areas. New data available from the Census Bureau will allow researchers to expand work in this area to focus on sub-county areas and more recent changes in labor markets.

Both farm and off-farm structural changes in rural economies have been studied as part of the previous NE-1011 project. In this project, researchers developed innovative ways to identify clusters of innovation or regional innovation systems ("RIS") in 13 southern states. They found that innovative activity in metro areas had little impact on economic development in nearby nonmetro counties. This research helped metropolitan areas identify gaps or shortcomings in their innovative capacity or environment. However, further research is needed to identify clusters and the potential for positive spillovers for rural economies. In the previous NE-1011 project, researchers completed a study about the Internet and rural economies. The study examined the economics of communication and information service delivery and on-line economic activities such as e-commerce. The proposed project will expand on previous research into the role of value-added agriculture and forestry, biofuels, and biotechnology in rural economies.

Using techniques developed through collaboration with numerous NE-1011 members across the country, researchers developed fiscal impact models for counties in their own state. The county-level fiscal impact model has been applied to estimate the impacts from exogenous changes on county fiscal accounts. Research by NE-1011 members has also quantified the contribution to local government revenues of various types of land uses (residential, commercial/industrial, and agricultural), and the demands on local government financial resources of those same land uses. These snapshots of current revenues and expenditures allow an assessment of the costs and benefits of different land uses from the perspective of local government finance.

In the previous project, two researchers surveyed the extensive economic literature on the impact of taxes on economic growth and found it to be inconclusive (Deller and Stallmann, forthcoming, 2007). While taxes move money from citizens and firms and increase consumption and production costs, they may also provide needed services that lower consumption and production costs. Clearly this is an area of needed further research, particularly in light of fiscal stress suffered by many local governments.

Retail recruitment, particularly of "big-box" or discount department stores, has become an increasingly popular economic development strategy. Historically, public subsidies to attract new retail businesses were used sparingly because retail was taken for granted: provided adequate job growth in manufacturing and other export-based industries, incomes would grow and retail spending would grow in response (Lackey and Eckenstahler, 1995). This view is changing with the growth of shopping malls and discount mass merchandisers. To the extent that new retail attracts customers from outside the community, or entices residents to buy locally when they had been previously shopping outside the community, some argue this is local economic development (Pittman and Culp, 1995).

The literature on public subsidies for economic development focuses mainly on non-retail development. However, it does provide some guidelines for determining when incentives may be appropriate (Bartik 2005; Buss 2001; Stallmann and Ball 2002). In general, retail development does not meet these guidelines, although there may be differences between rural and urban areas (Artz and Stallmann, 2006a). Nevertheless, communities continue to offer public subsidies to recruit retailers. In part, this relates to a widespread sentiment among local officials that failure to offer such incentives may lead to a loss of sales tax revenues when a store locates in a neighboring community. In a wide variety of circumstances, this phenomenon is reinforced by a tendency toward increasing reliance on sales taxes as a source of local government revenues (Artz and Stallmann, 2006b).

Another related economic development policy and its local fiscal implications is the designation of certain geographic regions as "tax-free" or "enterprise" zones, which generally are economically distressed. In enterprise zones, typically tax credits are linked to specific types of investment (such as building or installing new equipment in the zone) or employment practices (such as hiring zone residents). In a tax-free zone, businesses (existing, expansions, start-ups or relocations varies by state) are exempt from some or all state and local taxes for the duration of the zone designation. There is a significant literature on the impact of urban enterprise zones, stretching back to the beginning of such programs in the 1980s (Papke, 1994). Analysis techniques have ranged from cross sectional econometric analysis to simulations (Peters and Fisher, 2002; Lugar and Bae, 2005). However, the evidence on the effectiveness of the zones is very mixed; in particular, there is some evidence that a huge fraction of the benefits from these policies may simply be capitalized into property values (Landers, 1996). Little of this work, however, has focused on rural areas, which will be a key contribution of the proposed project.

Amenities can be broadly defined as qualities of a region that make it an attractive place to live and work (Power 1988, p. 142). In many cases, amenities and key quality of life attributes are immobile, nonsubstitutable and provide direct and/or indirect benefits to people. Examples include such things natural or wildlife areas and parks, but they would also include historic buildings and sites and cultural settlements (such as Amish communities). Amenities, however, include a wide range of attributes that are potentially shaped, and possibly even produced, through human action. Recreation areas and entertainment opportunities typically are highly influenced by public policy and markets.

Demographers have recently documented that rural areas dependent upon recreation as a source of jobs have experienced higher rates of in-migration than other rural areas (Johnson and Beale 1998). Economists have also found that natural and recreation-related amenities contribute to job growth as well (Deller et al. 2001). There continues to be some debate whether amenities and quality of life directly contribute to job growth or indirectly through in-migration. In a review on this topic, Gottlieb (1994) concludes that there is little evidence that quality of life and amenities directly induce employment growth. Instead, these attributes attract in-migrants who demand additional goods and services, thereby creating new job opportunities. We do not have a very good understanding of amenity and quality of life-led growth, however.

Many of the beneficiaries of rural amenities are urban residents who do not pay for the real costs of maintaining these attributes. Johnson and Beale (1998) note that many local governments face financial pressures in providing the infrastructure for recreation and tourism. These communities tend to become dependent on recreation spending and have higher than normal costs for highways and sewerage/water systems. Yet another study of the fiscal impacts of recreational housing development found that this type of development more than paid for itself when considering contributions to the tax base compared to the demand for local services (Deller et al. 1997).

Much of the literature on tourism has emphasized the seasonal and part-time nature of the employment in this sector and has raised questions about its contribution to income inequality in these regions (Leatherman and Marcouiller 1999). Jobs in the tourism and recreation sector tend to be low-wage, low-skilled and offer few benefits or opportunities for mobility. Is it possible for amenity-led growth to create high-wage, high-skilled jobs and increased diversification of the regional economy? On the other hand, Florida (2002, pg. 11) describes a creative economy in which jobs follow people to places that attract creative workers with "a variety of economic opportunities, a stimulating environment and amenities for every possible lifestyle." Some rural areas are likely uniquely positioned to attract and retain those that define the creative class. Overall, however, little research has focused on the potential for creative class strategies in rural areas and strategies to improve jobs in the tourism and recreation sector.

One school of thought is that urbanization is the solution to rural development problems, but this suggests that rural has a lower value than urban. Another body of literature argues that the "regional city" is a more appropriate way to manage urban-rural interaction. This approach suggests that while land conversion is part of the relationship, there are other important values contributed by open space and rural settlements to an urban agglomeration. Land management in the fringe has recently become a significant issue because of concerns with urban sprawl, but the focus of most of this literature is the impact of expansion on urban centers. The impact of urbanization on rural communities is not well understood. The two hypotheses have different implications for rural governance. The second approach has some similarities to the European approach to land use of multifunctionality. This project will also investigate the applicability of multifunctionality to the U.S. (Knickel and Renting 2000).

Finally, a number of collaborating NE-1011 researchers completed a multi-state study of local social capital. This project demonstrated how network analysis methods can be used to describe, measure, and analyze community capacity for self-improvement. Researchers used a common survey approach to collect primary data about exchanges of money, information, and political support between civic, social, public, and private entities in a total of 58 small communities (about 12 in each state). The network data was augmented with economic, demographic, fiscal, and geographic data. The NE-1011 researchers analyzed the network data by applying existing social network analysis techniques and Keystone Sector Identification techniques (developed previously by an NE-1011 member) to quantify the community network structures. Next, they statistically analyzed the network patterns with respect to their secondary characteristics, local policy, and economic outcomes. The main research findings to date include that (i) community network structures differ with respect to size (population), (ii) no "best" structure with respect to economic outcomes was found, (iii) the new network approaches do measure social capital, and are particularly useful for distinguishing bridging from bonding social capital; and (iv) local policy choices, in particular, majority votes for local option sales taxation may be related to community network character¬istics. The community network analysis activity by NE-1011 researchers collected the world's first known cross-section data on community networks, and has made it available to the research public for analysis and further basic research. It has and will continue to contribute to our ability to understand how societies can effectively organize themselves or why they may fail to organize themselves. Improving measures of social capital is a critical first step in understanding the role of social capital in community economic development.

In a search of current multistate research projects, only one project appears similar in research focus and objectives. Project NC1100 also studies rural labor markets and rural poverty, but focuses on the north central region and relies more on community case studies and employer interviews. The two projects will be highly complementary, and we will engage in discussions with the other project to avoid duplication and learn from each other.

Objectives

1. Identify and analyze ongoing and potential changes in rural labor markets and the impacts of migration, commuting, and workforce development policies on rural labor markets.
   
2. Investigate the potential for rural development policies based on entrepreneurship, industrial clustering, value-added and nontraditional agricultural businesses and analyze the spatial implications of industrial restructuring on employment and earnings.
   
3. Investigate the changing organizational structure, tax policy and fiscal standing of local governments and the impact of tax and/or expenditure limitations on local government fiscal stress and economic growth in rural areas.
   
4. Develop a better understanding of the role of amenities in rural development and the impact of economic and social changes on the quality of life in rural communities.
   

Methods

One of the primary motivations of this project is to continue and redirect the work performed under Regional Research Project NE-1011 (described above). While the project has four broad objectives, the research questions and methods overlap and complement each other. For example, industrial restructuring has implications for rural labor markets as well as for employers and indirectly, local government. Workforce development policies impact both rural workers and rural employers. Through multistate collaboration on these interrelated objectives, we can develop synergies arising from the cross-cutting themes of the project.

Specific Methods for Each Objective

Objective 1) Rural labor markets: Identify and analyze ongoing and potential changes in rural labor markets and the impacts of migration, commuting, and workforce development policies on rural labor markets.

Agricultural economists and rural sociologists with significant experience studying rural labor issues at Oregon State, North Carolina State, Pennsylvania State, University of Kentucky, University of Idaho, University of Minnesota, University of Missouri, Michigan State, Clemson, and Cornell will collaborate on analysis of local labor markets, migration and workforce policy with a particular focus on low-wage workers. The labor market research of this multi-state project will address three broad research areas. The first area focuses on how local labor market dynamics have changed in the last decade in rural areas. Labor market dynamics studies the flow of workers in and out of jobs. The second related area of focus is rural-urban migration and commuting, linking workers with communities. The third area of focus is workforce policy (child care, education, training) and economic development policy (increasing job opportunities) and ways to improve labor market outcomes for low-wage workers.

Newly-available Local Employment Dynamics (LED) data from the US Census Bureau and state employment agencies will be used to understand recent changes in local labor markets, define linkages among local labor markets and analyze the role of these linkages in economic development and community and family success. Most of the recent work on commuting linkages, for example, uses the Census Journey to Work data that are available only every 10 years. The LED data allows for more frequent analysis (and potentially a smaller scale of analysis, though there still is some nondisclosure and distorting of the data from small rural areas). Researchers in participating states will produce a profile of their state/county labor market dynamics using LED data and a framework that we develop at our first meeting. Measures of the availability and accessibility of jobs (or lack of) and definition of local labor markets in each of the cooperating states will be developed using LED data. Analysis will indicate whether various areas of South Carolina and other states have or will have a gap between appropriately trained workers and economic needs. A second issue is how local labor markets change as exurbanization takes place. This is more a question of how economic activity adjusts as rural areas become part of the urban fringe. This research also links with objective #4 on land use and amenities and economic growth.

Existing research on rural out-migration focuses predominately on young adults shortly after they enter the job market and thus does not capture individuals' long-term preferences for locations.This research will provide empirical analysis of the location choices of individuals through mid-life, with particular focus on college-educated labor and rural/urban distinctions. It will also provide some analysis of place-related factors that may influence workers' migration and location decisions. Migration is not just a one-way flow from rural to urban areas, of course, and urban-rural migration affects the composition of rural populations and the economic prospects of rural places as well. This project will also examine the causes and consequences of labor flows in both directions. For example, researchers in North Carolina will examine the economic and fiscal impacts of the expansion of urban labor markets into rural areas, focusing on the role of commuting and migration in labor market adjustments to employment shocks. Longitudinal and cross-sectional econometric analysis, controlling for spatial correlation, will be used to investigate these relationships.

Researchers in Minnesota and Michigan will investigate workforce policy and economic development focusing on three policy domains: child care, training, and job creation. Research in Michigan will explore current human resource management practices in agriculture and small businesses, and identify successful practices and their organizational context. This research contributes to reducing labor-related risks and improving the competitive position of rural businesses by promoting the adoption of successful human resource management strategies.

Researchers also will collaborate to generate estimates of direct and indirect occupational gaps as particular sectors grow. The research will build on previous NE-1011 research by linking profiles of the workforce by industry and job type to regional economic models (for example, as a side matrix to a Social Accounting Matrix). Growth of sectors generating better paying high-skill jobs will be emphasized. Such models will also incorporate commuting patterns to account for in-commuters as income leakages and out-commuters as sources of the regional economic base. An emphasis will be placed on secondary employment using PUMS based data in constructing household income based models and evaluating industry impacts on the distribution of income. Employment-occupation profiles and regional models will be used in local regional industry targeting and economic cluster development efforts.

Objective 2) Rural industry: Investigate the potential for rural development policies based on entrepreneurship, industrial clustering, value-added and nontraditional agricultural businesses and analyze the spatial implications of industrial restructuring on employment and earnings.

Researchers in Nevada, Missouri, Idaho, Indiana, South Carolina, Colorado, Maine and the Economic Research Service (ERS) of the Department of Agriculture will investigate the implications of industrial restructuring on employment and earnings prospects for rural areas. Of special interest are the roles of innovation, entrepreneurship and small business development, expansion of the service sector, and value-added agriculture on rural development. Researchers in Idaho, Missouri and Nevada will use input-output and COMPAS models to measure the spatial implications (shifts in locations of establishments and jobs) and workforce implications (shifts in employment opportunities among industries and occupations) of structural change. Research in South Carolina and Indiana will focus on the needs and demands of expanding rural industries in terms of workforce education and skills development; information and telecommunications infrastructure and services; and professional and business services (urbanization economics). The research findings with respect to workforce needs based on industrial structural change will be compared with the needs as identified by local Workforce Investment Boards (WIBs). Consistencies and inconsistencies will be documented and researchers will work with WIBs to develop a methodology for providing reliable information regarding workforce needs. Researchers in Idaho, Tennessee and Colorado will provide insights into the community development implication of a shift from a natural resource based rural economy to a tourism/retirement based economy. Findings from Idaho and Colorado research will be compared to research in Indiana and South Carolina that assesses the impacts of a shift from a rural manufacturing based economy to a service economy.

Current economic development policy promotes industry clusters and entrepreneurship as the keys to competitiveness in the New Economy. Metropolitan areas offer location advantages for clusters and entrepreneurs, yet numerous examples exist in rural areas of mature industry clusters and successful entrepreneurs. Researchers at Pennsylvania, South Carolina, Maine and New Hampshire will investigate the role of rural firms in regional clusters based on value chains, labor pooling, and intra-industry agglomeration economies. Research will identify regional industry clusters and assess opportunities for rural firms to participate in the benefits of cluster membership (networking, technology transfer, cluster marketing). Rural industry clusters will be analyzed to determine factors influencing clustering (proximity to inputs or markets, labor pooling, external economies of scale) and cluster characteristics related to the clusters impacts on local economic development (employment growth, wage rates, innovative activity, and new firm spin-offs). Industry targeting approaches based on industry clusters, value chains, and import substitution will be developed by researchers in Nevada, South Carolina, Pennsylvania and Missouri. The potential for and impacts of entrepreneurship and small business development as a rural development strategy will be assessed by researchers in Missouri, Pennsylvania, South Carolina, Tennessee and at ERS. Research will include the role of public policy in entrepreneurial development, the impacts of ICT and e-commerce on the attractiveness of rural locations for entrepreneurs, and the potential for rural innovative activity as a source of new products and processes. The role of innovation, along with a supportive entrepreneurial and small business environment, on rural economic development is of special interest to researchers in Pennsylvania and South Carolina. Research in these states will focus on the determinants of rural innovative activity and the role of community characteristics in creating new businesses and jobs based on R&D and the resulting innovations.

For many rural communities, agriculture-based and natural resource - based industries provide the greatest promise for locating and expanding in rural areas. Research will be conducted in Missouri, Iowa and North Dakota on the rural development impacts of increased demand for bio fuels and renewable energy sources; in Indiana on opportunities for value added agricultural development in rural areas; and in Kentucky, South Carolina and North Dakota on nontraditional agricultural businesses (e.g., agri-tourism or the equine industry); and in Tennessee on factors influencing siting of ethanol production facilities. Research in Arkansas will assess the capacity for and needs of underutilized rural labor to embark on entrepreneurial ventures. In addition, the rural economic development implications of the new farm policy will be investigated by researchers in Kentucky and South Carolina.

Objective 3) Rural governance: Investigate the changing organizational structure, tax policy and fiscal standing of local governments and the impact of tax and/or expenditure limitations (TELs) on local government fiscal stress and economic growth in rural areas.

Researchers in Missouri, Wisconsin, New York and Idaho will investigate the fiscal standing of local governments to assess the impact of TELs on government finances and property taxes and to determine whether local fiscal stress levels have increased. The analysis will use longitudinal data on local government finance and accepted measures of stress (Honadle, 2005) including the standards of the International City Managers Association (Nollenberger et al., 2003). The researchers will also investigate whether there is a differential impact of devolution and TELS on rural areas.

A related investigation by researchers in Missouri and Wisconsin will focus on the new institutional arrangements local governments are making to "get around" some of the TEL requirements. These limitations may lead local governments to pursue other methods of raising revenues, including the use of fees or new types of taxes, such as local option sales taxes, or use of other mechanisms, such as Tax Increment Financing (TIF). While many of the particulars of state and local finance differ across localities, comparison and synthesis of findings will allow researchers to draw more general conclusions for policy.

Researchers in Missouri, Wisconsin and Ohio will also investigate whether TELs increase or decrease economic growth. This question will be investigated using endogenous growth models and panel data (See Partridge 2004 for a discussion of the various methods of estimation.)

The second research focus under this objective is an analysis of the causes and consequences of retail recruitment and location-specific business tax incentives. While there is a large literature on the use of incentives and its impact on economic growth, the contribution of this research project is its focus on why incentives are now being used to recruit retail. Retail generally does not meet the standard economic tests of when an incentive might generate economic growth. In this case it is important to understand why local officials are taking these actions, and may be helpful in outreach to local officials to help them consider alternative policies. Researchers from Missouri and Iowa will explore the relationship between local public financing and public subsidies for retail on the use of public subsidies for retail developments using a combination of collection methods including newspaper archives, public records and surveys of public officials. Data on local option sales tax rates are readily available from the state Departments of Revenue. Appropriate econometric models will be specified to analyze whether greater reliance on local option sales tax revenues encourages local governments to subsidize retail development and whether rural municipalities are more or less likely to offer public subsidies to retailers.

Researchers in Minnesota will conduct related research on the impact of enterprise zones on economic activity in non-metro communities. To assess the effectiveness of an enterprise or tax-free zone, we would need to know how the region performed during the period of zone designation in comparison to what would have happened in the region in the absence of the program. Of course, we cannot know what would have happened in the zone, so researchers often use a quasi-experimental design that compares the economic performance of zones with the performance of regions that are otherwise comparable, but did not participate in the program. The research will: (1) thoroughly review the economic and regional science literature on location-specific tax incentives, (2) develop a methodology for empirically analyzing the impacts of enterprise zones (3) inventory available data sources (4) implement the methodology to analyze the early impacts of enterprise zones.

Researchers in Ohio and Kentucky will examine how economic shifts at the rural-urban interface affect governance (including fragmentation) and land use. This research also links to the fourth project objective on rural amenities and quality of life. The initial approach will focus on county business pattern data as a way to examine changes in economic function over time. As fringe counties become more firmly integrated into a larger agglomeration their economic function should adjust. Similarly changes should tale place in commuting patterns, demographic structure and in the stock of housing. Various hypotheses can be specified about the nature of these adjustments and tested using available data. Initial work will use the three major urban agglomerations in Kentucky - Cincinnati-Northern Kentucky, Louisville and Lexington metro areas. From this initial approach it should be possible to develop preliminary conclusions about how to better design governance mechanisms that better fit these transitions and new land-use patterns. We will also examine the potential for the multifunctionality approach of the European Union in these areas in the United States.

Objective 4) Rural quality of life: Develop a better understanding of the role of amenities in rural development and the impact of economic and social changes on the quality of life in rural communities.

The role of amenities will be addressed by researchers in Colorado, Georgia, Kentucky, Maine, Missouri, Ohio, New York, North Dakota, South Carolina, and Wisconsin through a range of research methods. In order to better understand the role of amenities in rural development, we need to clarify the conceptual meaning of amenities and quality of life and ways of measuring their impacts on communities. Working collaboratively across states and communities, the project will enhance our understanding of how local and state policies help communities to manage their amenities. Given the regional nature of most amenity and quality of life attributes, comparative analysis of strategies of coordination management across multiple jurisdictions will be conducted. Analysis of the relationship between quality of life and economic growth in different locations will lead to more generalizable conclusions.

Research undertaken at Wisconsin will build upon the success in the previous project (NE-1011) in modeling the role of amenities in economic growth and development by exploring new means to measure amenities. Specifically, there is an endogenity problem that exists between natural and built amenities that the literature has largely overlooked. This proposed work will directly test for endogenity and test for sensitivity of prior research results for endogenity bias. Particular attention will be paid to the notion of remoteness and the role of microenterprises in the economic development and growth process.

As noted, the whole concept of amenities (natural, recreations, urban, quality of life) is very poorly defined, which further exacerbates efforts to measure their impact on communities and households. One "amenity" is access to urban centers for a range of services and attributes including cultural, recreational, and shopping. These urban amenities likely vary in their intensity up the urban hierarchy. Thus, with national data, we will begin to assess how rural access to urban areas affects households in terms population movement and in terms of average wages and rents. This will be assessed with regression analysis that incorporates geographic information system measures of distance to urban centers, where urban center size will be one of the variables.

The project will also develop a series of regional dynamic models to explore the interdependent relationship between rural regional growth and natural amenities and the implications for policies. Towards this end, a regional migration model with urban agglomeration and endogenous natural amenities will be developed. The attraction effect and production of natural amenities will be incorporated into a basic two region model with labor mobility and agglomeration economies to examine the conditions under which endogenous natural amenities alter the steady state distribution of population across regions. We will also develop a dynamic model of ecological change in which the cumulative effects of population growth can lead to nonlinear changes in the natural amenities over longer periods of time. This model will be simulated to examine various policy approaches to compare and contrast market-based vs. regulatory approaches to managing amenities as well as static vs. adaptive policies that either remain fixed or adjust over time as changes in ecological quality and amenities occur. Researchers will collect spatially disaggregated land use, location and ecological data from the Lake Erie region and other lake-based amenities regions in the U.S. to specify the model. Spatially disaggregated migration and amenity data will also be collected for a multi-state area and spatial econometric models of joint population, employment and amenity change will be estimated to test amenity-driven growth hypotheses derived from the theoretical and simulation models.

Researchers in Maine, Tennessee and Kentucky propose investigating the role of rural health accessibility as a driver of economic development through its perceived role in quality of life. Rural health issues encompass several of the projects objectives, including workforce issues, industry structure changes, and migration and retirees location decisions.

Researchers in Georgia, South Carolina and North Carolina will address development pressures in their coastal marshland environments. The research will address popular concerns that the rapid pace of uncoordinated, piecemeal development is leading to irreversible damage to these fragile environments, which in turn may have negative impacts on the quality of life. Using hedonic price models linked to GIS data bases, we will estimate benefits and costs from alternative development scenarios that are observed in different housing and commercial property developments. The scenarios will vary by their degree of compatibility with the marshland environment, as judged by colleagues in the respective state Sea Grant programs.

Other researchers will focus on the amenity - economic links specific to their communities or regions. Researchers in Maine will collect new data in order to model changes in pollution and potential health outcomes and responses to growth in rural communities. Researchers in Colorado and NOAA will explore the spatial relationships of competing demand for land between production agriculture and other land uses through cross-sectional econometric analysis controlling for spatial heterskedasticity. Basing their work on a gravity model that assumes high value agricultural enterprises and quality-of-life driven development near urban area, their cross section analysis explores the evolution from low value, high volume to high value crops as agriculture is affected by household demand for land in high amenity areas.

Faculty at Penn State will conduct research on human-environment interactions in the rural-exurban-urban transitional zone (t-zone). The proposed research will involve social scientists and scientists working collaboratively to understand how human well-being and community quality of life are affected by socioeconomic-demographic and environmental attributes and forces, and the interactions between them. The work will focus on the land transect from Central Pennsylvania through Southeastern Pennsylvania to the urban periphery of Baltimore, a region characterized by a rapid rate of population dispersion from adjacent urban areas of Baltimore, Philadelphia and New York. The plan is to conduct comparative studies with researchers involved in the Baltimore Ecosystem Study (BES). Three approaches will be used: 1) multi-level (hierarchical) modeling to understand the impacts of multiple levels of effects (e.g., individual vs. household vs. immediate neighborhood vs. local community), 2) DEA (data envelopment analysis) and VEA (value efficiency analysis) to explore the relationships between attributes and well-being/quality of life, and 3) agent-based (ABM) and multi-agent simulation (MAS) models to understand human-environment feedback effects, to build alternative scenarios for development and to explore alternative policies. Spatial analysis will also be used given the inherent spatiality of population-induced development processes.

Measurement of Progress and Results

Outputs

• Multi-objective outputs:<ul><li>Journal articles, extension publications, popular press articles and book chapters targeted towards interdisciplinary audiences. These publications will communicate research results and synthesize findings across themes and states.<li>Conference or workshop for policymakers (e.g., at USDA ERS) on key policy issues and research syntheses.<li>Integrated analyses of cross-cutting issues such as the interrelationships between amenities and residential choice, labor markets, businesses and economic growth.<li>Further development and sharing of methodological and theoretical approaches to researching regional and community economic and sociological issues.</ul>
• Objective 1:<ul><li>A framework for state/county labor market profiles using newly available Census LED data developed and tested in a number of locations.<li>Employment-occupation profiles for use in local regional industry targeting and economic cluster development efforts.<li>Research-based recommendations regarding labor market issues related to rural development with relevance for state-level Workforce Investment Boards, community college/vocational education programs and immigration/migration policies.</ul>
• Objective 2:<ul><li>Regional models and employment-occupation growth profiles for use in local regional industry targeting and economic cluster development efforts.<li>Research-based recommendations for rural development policies based on entrepreneurship, industrial clustering, value-added and nontraditional agricultural businesses.<li>Development of a set of targeted economic development models and educational tools.</ul>
• Objective 3:<ul><li>Development of methodology for empirical analysis of the impacts of enterprise zones.<li>Continued refinement of the CPAN-Compas family of fiscal and economic impact models.<li>Timely information and partnering with local policymakers to assist in developing fiscal and economic policies in response to changes occurring in rural communities.</ul>
• Objective 4:<ul><li>Expansion of multifunctionality approaches (multiple uses from the same resource base) from European to rural U.S. context with a focus on the nonmarket attributes of resources.<li>Documentation of the role of rural health accessibility as a driver of economic development through its perceived role in quality of life.<li>Information and research-based recommendations for local leaders and NGOs on the impact of alternative land use and resource development planning on quality of life.</ul>

Outcomes or Projected Impacts

• Multi-objective outcomes and impacts:<ul><li>Increased knowledge of the forces impacting rural communities in terms of labor markets, industry, governance, and quality of life.<li>Better use of public resources.</ul>
• Objective 1: <ul><li>Improved understanding among community leaders and citizens of the dynamics of labor markets and businesses and their impacts on rural communities.<li>Improved training strategies and identification of areas of future need for planning by community and technical colleges.<li>Economic and workforce development policies that account for recent economic structural and labor market changes and that may reduce rural poverty and improve economic outcomes for rural families.</ul>
• Objective 2: <ul><li>Improved understanding among community leaders and citizens of the dynamics of structural economic changes and their impacts on rural communities.<li>Economic and workforce development policies that account for recent economic structural and labor market changes and that may reduce rural poverty and improve economic outcomes for rural families.</ul>
• Objective 3:<ul><li>More informed discourse on role and organizational structure of government and the use of tax incentives for economic development.<li>Better understanding of the causes of local fiscal stress and the implications of tax and expenditure limitations on rural communities.</ul>
• Objective 4:<ul><li>Improved access to and protection of amenities and rural quality of life.<li>Research establishing the linkages between measures of social capital and the economic growth or decline of rural areas will help to enhance the economic well being of rural communities and promote the general economic growth and development of rural areas.<li>Evidence on the benefits of amenities or of econ-friendly development may encourage private developers to undertake projects that sustain amenities.</ul>

Milestones

(2008): Organize the technical committee, develop and share specific research methodologies across states, identify data sources, and conduct preliminary analyses. At the first year technical meeting we will discuss and compare research methodologies for each objective and develop a framework for state/county labor market profiles for Objective 1. We also plan to organize a briefing conference with ERS in the first or second year of the project to highlight and synthesize research on key topics of interest to policymakers.

(2011): Conduct analyses for each objective, with particular focus on producing results that are comparable across the participating states. Conduct outreach activities including input from stakeholders on objectives and results. Produce profiles of state/county labor market dynamics using LED data in participating states.

(2012): Synthesize results across states and across objectives, complete comparative analyses, and identify policy implications and next steps. Continue outreach activities.

Projected Participation

View Appendix E: Participation

Outreach Plan

The project will engage in outreach to the scientific community, the policy community and local citizens and decision makers. The proposed project is national in scope and impact, with representatives from all regions in the US. Areas not directly studied will benefit from the development of methodologies and synthesis of findings. Rural development approaches will be compared and contrasted across regions. Project investigators will present the research results and seek professional input into their research at professional meetings of the American Agricultural Economics Association and of several regional science associations (Southern Regional Science Association, Western Regional Science Association, North American Regional Science Association), and through associated professional journals. Team members will also present results at other professional meetings and outlets, including the Rural Sociological Society, the National Association of Community Development Professionals, and the Community Development Society. Outreach to the policy community will be facilitated by close affiliation of various project members with the Rural Policy Research Institute, the Rural Poverty Research Center, and the four regional Rural Development Centers. Project investigators have strong links to the Cooperative Extension System through the state and local offices of the university Extension Services, and many team members hold extension appointments. Technical committee members will also share information in local forums. Outreach to community and state policy makers will include the Workforce Investment Boards and those with interests in local community development and workforce development, including rural community colleges. Results will be summarized in publications like extension bulletins, policy briefs, and mass media to increase awareness and understanding of the forces impacting change in rural communities.

Organization/Governance

The project will be organized and governed in the standard way by a Technical Committee. Each participating state or agency will have an official representative appointed by the Experiment Station Director and an administrative advisor will be designated by the Experiment Station Directors. The Technical Committee will meet at least once per year, usually in the winter or early spring. The committee will evaluate work plans to ensure adherence to the project outline and accomplishment of projected outcomes.

A chair and secretary will be elected annually by the Technical Committee. The secretary also serves as the chair-elect. The chair, in consultation with the administrative advisor, calls and presides over the meeting of the Technical Committee. The chair is responsible for preparing the annual report of the project. The secretary records and distributes the minutes and performs other duties as assigned by the Technical Committee.

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Attachments

Land Grant Participating States/Institutions

AL, AR, CA, CO, DE, GA, IA, ID, KY, LA, ME, MI, MN, MO, NC, ND, NH, NY, OH, OK, OR, PA, SC, TX, WI

Non Land Grant Participating States/Institutions

USDA/ERS