Brief Summary of Minutes of Annual Meeting

This is a termination report.

The NE-1029 project was very successful as numerous research studies, along with dissemination of results and key findings, were completed under each of the four objectives. Some of these studies are highlighted below; others are summarized in the annual reports. Objective 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. NE-1029 researchers in Tennessee explored the long-run relationship between retiree in-migration and education expenditures. Particular attention was given to the so-called Gray Peril hypothesis, which maintains that funding for some public services will decrease because retirees are unwilling to support services not directly benefiting them. The findings lend support to the notion that funding for local public education is different in counties that attract and retain seniors in large numbers than in counties that do not. The results of the analysis offer little support for the notion that growth in per pupil education expenditures is negatively correlated with senior in-migration, or what might be termed strong Gray Peril. On the other hand, the results suggest that counties experiencing significant senior in-migration were less likely to translate increased fiscal capacity to fund education than were counties that had not attracted significant senior in-migration. Complementary work by NE-1029 researchers in Pennsylvania explored the implications of a graying farm population on rural economies. Research suggests that the graying farm population is an important issue, having potential to strongly influence the rural landscape. Research on labor markets focusing on low-income workers was completed by NE-1029 researchers in Pennsylvania. Using data from the US Census Bureau, results found a smaller percentage of nonmetro (than central city or suburban metro) young adults ages 20 to 24 are only in school, a larger percentage work only, combine school and work or are idle. Of nonmetropolitan youth in 2000, 20% remained in nonmetro areas five years later. Comparing nonmetropolitan stayers and leavers, 78% of stayers worked only, compared to 62% of leavers; 23% of leavers combined school and work, and 10% of nonmetro stayers did so. Idleness was slightly higher among leavers (12%) than stayers (10%). Nonmetropolitan leavers and stayers had quite different experiences with work and schooling as young adults. These differences translate into differential levels of educational attainment and earnings in the longer term. Other work on labor markets by NE-1029 researchers in Colorado focused on labor market performance, the role of immigration, and the agribusiness sector. Work on immigration analyzed the trends observed in hired labor used in the Colorado agricultural sector, how it may relate to policies that are evolving for immigration and the economic impact that different labor policies may have on industry and communities. Findings were presented at one conference and disseminated through discussions with major labor advocacy groups in Colorado. Commuting network studies by NE-1029 researchers in Pennsylvania analyzed the impacts of network topography (e.g., centrality, in-entropy, out-entropy) on local economic growth rates. Results show 1) marked increases in commuting in the US over time , and 2) that even rural counties in the most rural places (rural-urban continuum codes 6, 8) can have high out-centrality scores, comparable to those found in urban core areas (code 1). Research also suggests the need for more investigation at the micro level into underlying mechanisms of settlement patterns and economic activity along the rural-urban continuum. Related research now underway will determine the relationships among commuting, migration and network topography. NE-1029 researchers in Missouri investigated the entrepreneurship of migrants and their location choice in an attempt to draw connections between migration and economic development, especially the role of business formation in rural development. Their findings suggest that social capital and social networks established in ones home region are a strong factor in location choice of entrepreneurs. Entrepreneurs from rural origins tend to start their businesses in rural areas in general and half of entrepreneurs migrate back to their home region to take local comparative advantages. Rural entrepreneurs are also more likely to obtain financial support from family members, friends and local banks to start a business than are their urban counterparts. More generally, find rural residents are more likely to start a business than urban residents. One plausible explanation for this finding is a lack of job opportunities in more remote rural areas. A primary focus of NE-1029 researchers in Ohio is on how proximity to urban areas affects housing location, land-use, economic activity, population retention, and rural poverty. It has also sought to identify patterns of exurbanization and the underlying processes that determine these patterns, as well as the linkages between regional processes (e.g., regional economic growth, job creation, and commuting), natural amenities, and exurban land-use patterns. Finally, this work demonstrates a link between small business vitality and subsequent local economic growth. The research has been disseminated via the web, at professional conferences, and through journal articles. The audience for these papers includes academics, while the underlying findings also support the less technical presentations, media work, and policy briefs. A second set of outputs revolve around policy briefs that illustrates how the green economy will affect the Ohio and national economies. The briefs suggest modest effects on job creation and describe how a more targeted approach would be more effective. The findings of the policy brief were disseminated via press releases, web-based publications, radio interviews, and by public presentations. The targeted audience for these policy briefs and related presentations include informed decision makers, economic development officials, and elected/appointed government officials, and interested members of the public. To leverage greater public appeal, Ohio State University has formed partnerships with organizations such as The Federal Reserve Bank of Chicago and Greater Ohio. Objective 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. Recruiting food, fiber, or biomass processors remains a plausible rural economic development strategy in the belief that rural areas provide access advantage to the raw materials needed for these operations. While expansion of the manufacturing sector in rural areas ended in the 1980s, food processing remains more rural-based than most manufacturing, suggesting that some nonmetropolitan communities have comparative advantage compared with urban areas in attracting food processors. Community planners may consider food manufacturing and other value-added agribusinesses to be solutions to offset rural outmigration and unemployment because these activities are potential sources of off-farm work, and could increase farm income through backward linkages to local agricultural production. NE-1029 researchers in Colorado and Idaho analyzed how different economic development strategies involving food (local foods, value added agriculture, new distribution models) or natural resources (agritourism, ecosystem services) may be influencing communities. Outputs included a series of models and results based on secondary data, survey data and/or IMPLAN models customized to regions of Colorado. The research has been disseminated in academic meetings, to community stakeholders (producer groups, public health groups, ag advisory councils) and in targeted workshops of producers and food system stakeholders. Growth of the meat and poultry processing industry in rural parts of the Midwest has generated considerable controversy regarding the economic and social impacts of new plants on their host communities. Much of the evidence informing this debate is anecdotal or based on case-studies of very large plants. NE-1029 researchers in Missouri examined the impacts of meat and poultry processing plants on social and economic outcomes, using data on non-metropolitan counties in twenty-three Midwestern and Southern states spanning a decade. The research shows that while growth in the industry is associated with community change, particularly changing demographics, the dramatic burdens documented in a few case studies appear to be the exception rather than the rule. The Missouri research found that the industry has impacted the demographic composition of rural communities and their schools, but find no evidence that the industry increases per capita government expenditures. The impact of livestock production on the local economy was much lower than expected. This suggests rural communities trade off the economic benefits of hosting these large employers against the costs of accommodating needs of new residents. In another study investigating the local determinants correlated with attracting food manufacturing investment, NE-1029 researchers in Indiana and Tennessee found that micropolitan counties had a comparative advantage with respect to attracting some types of food manufacturing investment, but the most rural, noncore counties were less likely to attract any type of food processors. All food processor types preferred locations in or around urban areas, or in nonmetropolitan counties that provide access to product or input markets, or agglomeration economies. Supply oriented food processors tend to locate in nonmetropolitan counties providing access to agricultural inputs. Noncore counties simply lacked the critical mass in terms of access to product demand centers or availability of infrastructure to meet logistical needs. The development of biomass-based industries, which could hold promise for some rural areas, face many challenges. The organization of developing biomass-based industries could become a key non-technical barrier to its development. Biomass sources could be a low cost feedstock for energy production such as cellulosic ethanol. This potential low cost hinges on effective and efficient markets for the raw material. NE-1029 researchers in Missouri and Kentucky examined the broad industrial structure of the current biopower industry including the organizational forms used to procure or transfer ownership of biomass. Using survey evidence, the Missouri study found evidence that the current biopower industry is highly vertically integrated with little use of spot markets, which is consistent across the type of biomass fuel used. In Kentucky, the results of the economic impact analysis of the biomass sector were reported to state policymakers. NE-1029 researchers in Tennessee examined the local characteristics that were important to attract ethanol plant investments in the lower 48 United States between 2000 and 2007. This period marked an era of rapid industry expansion and competition for prime sites that provided access advantage to feedstock and co-product markets. The importance of ethanol plant location determinants varied, depending on how remote a location was, and whether an ethanol plant was established, or announced. While some rural counties exhibited comparative advantage with respect to attracting ethanol plants, it appears that many rural communities were less likely to attract ethanol plant investments. During this period, the primary drivers behind the decision to locate an ethanol plant in a given county were access to feedstock and the absence of operating ethanol plants. Access to co-product markets and transport infrastructure was also important. These findings are a first-step towards understanding the interaction between ethanol plant location and the local factors providing comparative advantage to counties considering ethanol plant recruitment as a development strategy. While the results appear encouraging for some rural areas, a rural county's access to or availability of important location determinants should be put in perspective before limited funds are invested to attract ethanol plant investment. NE-1029 researchers in Arkansas conducted a study of Hispanic entrepreneurs, showing that this demographic group operates a diverse array of businesses. The study also identified barriers faced by Hispanic entrepreneurs. Alleviating these barriers will help communities more fully capitalize on the human capital that exists in these migrant groups. They also examined the alternative sources of economic stability for declining rural locations across Arkansas. In particular, they used survey data to explore the potential impact to local economies from an expansion of agritourism in the distressed Delta region of Arkansas. The analysis reveals that farm operators' and/or landowners' perceived future success in the agritourism industry in Arkansas entail different assistance depending on the regional location in the state. The assistances identified are support in training the farm operators; agritourism promotion and marketing; and awareness of laws and regulations impact on agritourism. NE-1029 researchers in three states examined aspects of the retail sector in rural areas. Researchers in Missouri and Iowa studied the impact of Wal-Mart on rural wages. Prior research suggests that Wal-Mart decreases the average retail wage. This is possible if it has market power, employs more part-time workers, employs workers with lower skills, or employs a different mix of skills, such as fewer managers per worker, or offers lower wages but higher benefits relative to other retailers. Their hypothesis is that in rural areas Wal-Mart is a large demander relative to the labor supply and may increase the average retail wage. Using a weighted regression they found that Wal-Mart increases rural retail wages. In Maine, NE-1029 researchers developed a demand threshold method to examine the retail and service sectors of communities located in Maine. The method was initially applied to the Town of Orono, and a project report was released in April of 2011. Researchers are currently using the demand threshold method to study the retail and service sectors of other Maine communities. They also conducted Retail Trade Area Analyses for rural Maine communities to assist economic development professionals and local officials in their economic development efforts. Research on the retail and service sectors of Maine communities has been used by economic development professionals to identify gaps in the local economy, which might be candidates for new business attraction and local entrepreneurial activity. Broadband connectivity is widely promoted as a potentially significant contributor to local economic development in relatively isolated rural places. The high-speed data transmission that broadband facilitates reduces the effective cost of distance to businesses and to consumers, easing key constraints at play in such communities, namely small markets, high transport costs and geographic isolation. Ironically, precisely the same physical remoteness and low population densities that make broadband particularly desirable in rural areas also render its deployment expensive. As a result, broadband penetration into rural areas - and particularly more remote areas - has lagged more densely populated and less remote locations. Since 2000 federal Broadband Loan programs authorized under consecutive Farm Bills have directed more than $1.8 billion to private telecommunications providers in 40 states with the explicit goal of increasing the amount of high-speed data transmission capacity available to rural residents and businesses. Most recently, $2.5 billion of the $7.2 billion funded by ARR Act of 2009 explicitly targeted rural areas in new federal spending for these same purposes. The economic implications of investment in rural broadband Internet was conducted by NE-1029 researchers at the Economic Research Service (ERS), Clemson, and North Carolina State University. ERS research showed that broadband access to the Internet contributes to greater rural economic growth. NE-1029 researchers in Oklahoma focused on the role of policy and digital communications on economic development/entrepreneurship and on local government and tax policy, respectively. The findings of this research will promote a better understanding (change in knowledge) of the environment required for successful entrepreneurial efforts. This work serves to inform and encourage use of broadband in rural areas and generate new business activity. Similarly, NE-1029 researchers in North Carolina evaluated the impact of USDAs low-cost broadband loan programs on the U.S. agricultural sector. The broadband loan programs increase access to high-speed internet in recipient communities, which can raise farm sales by increasing both farm output and prices received by producers. Further, high-speed internet may drive down costs by providing information on cheaper inputs and better management practices, leading to an overall improvement in farm profits. Using data from the 1997, 2002, and 2007 U.S. Census of Agriculture, they employed an inverse probability reweighting technique in a panel fixed effects model to show that the two USDA broadband loan programs have had positive causal impacts on farm sales, expenditure, and profits. The positive effects for crops are larger than those for livestock and animal products. Objective 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. In Michigan, NE-1029 researchers focused on public finance policy and economic development. The research examined the political economy of state subsidies in the emerging ethanol industry, the use of the tax increment finance development tool, the impacts of property taxation on property value growth, the role of governance in limiting natural disaster impacts, among other research projects. The procedures used to evaluate specific research questions depend on the nature of the question at hand. They rely on local/regional, state, and international economic and government data or survey data to examine specific issues. Variation over time and across units of observation can provide an excellent evaluative environment. Generally, the goal of the program is to generate quality analyses that will help government decision makers better understand how to respond in the midst of evolving conditions. This past year they enhanced the Michigan local government database management system so that local authorities could pulled data from the database into Excel file, which generated a series of fiscal measures (Citizens Guide) in accordance with Governor Snyders requirement for greater transparency in government finance (a new requirement to receive revenue sharing). The portal and the Citizens Guide can be accessed at http://f65.mitreasury.msu.edu/. The research in the policy arena appears to be making its way into decision processes in Michigan. NE-1029 researchers in Wisconsin and Missouri collaborated on a project investigating tax and expenditure limitations at the state and local levels and their impacts on economic growth, credit ratings and state debt. One argument for imposing limitations is that lack of fiscal constraint on the part of elected officials and results in bloated government which hampers economic growth. This argument is testable. The results to date suggest that state limits have little impact on economic growth. This research was cited in a report by the Turkish Ministry of Finance, A New Tendency in Management of Fiscal Policies: Rules and Limitations on Taxes, Expenditures, Debt, etc. (translation). One difficulty for doing the research is that no two limits are alike and they change overtime. An index of these limitations was developed for each state from 1969 to 1990. Current research uses this index to investigate both growth and credit ratings. A past collaboration of Missouri and Wisconsin provided a set of papers on the impact of retirees on rural areas, which continues to generate interest. The Daily Yonder interviewed Missouri and the article they published was picked up by over 300 media outlets, many of them small rural newspapers. In Arkansas, NE-1029 researchers focused on the decline of the economic base in many rural areas and inability of local governments to generate enough revenue to pay for needed public infrastructure and services. A recent study of county government revenue and expenditures found that nearly one-fourth of non-metropolitan counties lost revenue between 1999 and 2007. Not only do these counties have little capacity to generate local revenue, but many have high sales and property tax rates which further constrains their ability to generate additional local revenue. NE-1029 researchers in Tennessee evaluated the land value taxation as a potential smart growth policy tool because it does not infringe on private property rights. Through land value taxation, municipalities can reform prevailing property tax schemes to moderate sprawl by reducing the tax rate applied to building values, while increasing the tax rate applied to land values. Such taxation schemes have been referred to as a two-rate property tax (TPT). A two-rate property tax (TPT) imparts different tax rates on land and structures. A hypothetical TPT is evaluated as an instrument to promote open space preservation in a rapidly growing metropolitan county in Tennessee. The potential TPT effects on open space equilibrium levels were compared with simulated equilibrium levels reflecting the TPT policy shock. Ex ante results suggest that equilibrium open space levels were positively displaced following a revenue neutral tax policy on land. About 76% of the households valued open space more following a land value tax rate of 9.04%, which suggests that households in certain locations are likely to support programs or policies preserving open space. NE-1029 researchers in Ohio developed new theoretical and empirical methodologies for evaluating how local government policies affect economic outcomes. One novel approach used has been the application of survey data of county officials in understanding the effects of county policies on poverty and growth. Another novel approach is the incorporation of fine migration data in understanding growth in Appalachia. This research illustrates that tax incentives and other traditional economic development efforts are typically ineffective and describes more effective place-based strategies. Other research focused on estimating models of residential land use change using micro-level data on residential subdivision development. Findings from econometric models of the quantity and intensity of development reveal the unintended consequences of land development policies that delay larger development projects closer to urban areas and hasten lower density development in more rural areas. Other methodological advances have focused on developing spatial simulation models of urbanization that incorporate microeconomic behavior into spatial modeling and using this model to generate predictions of how land use policy changes influence patterns of land use change. The associated OSU policy briefs have facilitated the non-technical dissemination of the knowledge creation for policymakers and decision makers. From these efforts, there are emerging signs of changes in actions that would help represent transformative change. The knowledge creation has been used to support policy changes that would support efforts to promote rural/urban regionalization including better land use planning, linking rural and urban economies for their mutual benefit, and findings ways to generate efficiencies for local government service provision. Likewise, policy briefs on shale energy raises the specter that communities have to engage in long-term planning. Past policy briefs allowed researchers to work with the State of Ohios commission on Reforming Local Government and Improving Local Government Collaboration. The knowledge creation continues to support the growing realization that Ohios manufacturing economy of the middle 20th Century will not return and the state needs to seek new opportunities for the 21st Century. In Oregon, NE-1029 researchers examined the termination of County Forest Payments and Oregon County Services. Because of the decline in federal timber harvests under the Northwest Forest Plan, the forest related revenues that historically were shared with county governments declined dramatically. This put these governments at risk and led to a series of federal laws that provided federal payments to these counties, culminating in the Secure Rural Schools Act in 2000. The SRS payments are ending this year. In its 2009 report on the implications of scheduled termination of the Secure Rural Schools and Community Self-Determination Act, the Governors Task Force on Federal Forest Payments and County Services estimated that, without the SRS payments, one quarter of Oregons counties (9 counties) would face losses of more than 25% of discretionary General Fund revenues, and almost one-third of counties (11 counties) would lose more than half of their Road Fund revenues. In 2011, 11 Oregon reporters for both print media (including Oregonian, Eugene Register Guard, Oregon Business magazine) and radio (including Jefferson Public Radio and KSJJ) interviewed project investigators for stories on the termination of the SRS funding and the future of rural communities. Objective 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. NE-1029 researchers in Iowa examined the factors affecting economic opportunities and quality of life for communities and for individuals living and working in rural areas. The analysis has helped communities understand economic changes and to develop strategies to adjust to them. Ongoing research and outreach are helping communities evaluate opportunities for investing in recreational amenities such as trails, water quality improvements, and boat docking facilities. Identifying opportunities to expand recreational resources improve quality of life for Iowan as well as creating new jobs and income. In Georgia, NE-1029 researchers analyzed the environmental impacts of housing demand on saltwater marshes found that people are willing to pay a premium for larger lots, more common space and less impervious surface. Less important in rural areas so developers lose their incentives to practice green development. The policy implications are that salt water marsh counties are fastest growing so it makes sense to plan green development incentives into subdivision projects now. Scientists in Tennessee evaluated the effectiveness of a two-rate property tax (TPT) on housing development density and the preservation of open space amenities. Findings suggest that 76% of the households valued open space more following a land value tax rate of 9.04%, which suggests that households in certain locations are likely to support programs or policies preserving open space. NE-1029 researchers in Pennsylvania were involved in a multidisciplinary research project focusing on measuring perceptions and impacts of development and land use change on indicators of quality of life across the Susquehanna Transition Zone (STZ) in Pennsylvania and New York State. The effort involves qualitative surveys of local officials and other key informants, quantitative surveys in a stratified sample of HUC14 watersheds, and photo-interpretation of changes in land use and land cover from historical aerial photographs for the selected watersheds, dating from the late 1930s. Access to amenities and the role of rural amenities in driving patterns of growth is an important component of this work. Surveys across the region will be completed within a year, forming the first wave of data collection to monitor changes in land use, environmental impacts, economic well-being, and quality of life across the T-Zone transect, as widespread development continues. Data collection provides for broad stakeholder input and assessment of change and is particularly relevant given the recent Chesapeake Bay Executive Order. Creative regions have been the subject of study by NE-1029 researchers in Tennessee and at ERS. Rural counties with both higher proportions of creative capital and richer entrepreneurial contexts (as measured by either the rate of self-employment or the number establishments per job) typically enjoy faster business establishment and job growth, and the beneficial effects of this synergy tends to increase with the prevalence of local outdoor amenities. While limited in scope in terms of the time period analyzed, the secondary data analysis of industry clustering shows some potential for certain economic sectors of the region. The growth potential stemming from the clusters appear to be associated with high-tech sectors or they are involved in the production of intermediate goods. Though this may be encouraging for counties with established economic bases suitable for attracting and retaining businesses which make up these sectors, caution should be used by local leaders in terms of picking winner industries in the hopes of becoming competitive with neighboring counties who have been successful in attracting businesses. As with any clustered developed strategy, careful measurement of the local assets communities have in place must be put in perspective in terms of social and human capital, geography, and even local history. Without precedence for attracting certain industries, the odds of doing so in the future may be lower without the necessary infrastructure, talent, or connections to other economic centers of influence. The Tennessee and ERS findings also suggest that growth in total county income in the United States was lower in counties that had the following: larger per capita income in 1990, a higher population density in 1990, a higher proportion of older individuals, and a higher proportion of population under 20 years of age. Counties with a heavy dependence on agriculture grew more slowly in general. Counties that grew at a faster rate had a high proportion with a college degree, close to a metropolitan area, a high proportion of commuters, and relatively more sunshine in January. It might be reasonable to expect that adding, expanding, and improving existing recreational amenities in rural counties can generate increases in aggregate income through a combination of attracting employment or population. In rural areas, there is a negative relationship between property taxes and aggregate income growth. To reduce the negative effect of high local property taxes, county government officials might explore alternative revenue sources (e.g., shifting property tax base, using other taxes, cost-sharing arrangement with state and federal governments) that do not deter in-migration or outside investment.