Rural Economic Development: What Makes Rural Communities Grow?

This report identifies local factors that foster rural economic growth. A review of the literature revealed potential indicators of county economic growth, and those indicators were then tested against data for nonmetro counties during the 1980s using multiple regression analysis. The principal variables examined included demographic and labor market factors, education levels and activity, local taxes and expenditures, transportation access, business and banking structure, amenities, relationship to metro areas, and economic base. Factors related to local and regional economic growth (improved county earnings) were attractiveness to retirees, right-to-work laws, excellent high school completion rates, good public education expenditures, and access to transportation networks. Factors associated with poor earnings growth included high wage levels, high concentrations of transfer-payment recipients, high concentrations of small independent businesses in the goods-producing sector, and high concentrations of African Americans. The mix of industries active in a county was also strongly associated with county earnings. In the 1990s, nonmetro counties in general experienced greater real earnings growth, and some of the factors associated with stronger or weaker growth may have become less powerful. (SV)