Presented to the Prosperous Places: Building Economic Competitiveness in Rural Regions and Small Communities Conference Salt Lake City, Utah March 26, 2013 Charles W. Fluharty President & CEO Rural Policy Research Institute

I. Recalibrating the rural/urban dialogue and paradigm II. The global rationale for a “Regional Rural Innovation” strategy III. Is there a “rural” commitment in current U.S. domestic policy? IV. Rural imperatives, and signs of hope and progress! V. Final reflections: Why your work is so critical

I.Recalibrating the rural/urban dialogue and paradigm

 U.S. Census Bureau  Urban and Rural Areas  Office of Management and Budget  Core Based Statistical Areas – Metropolitan and Nonmetropolitan Areas

 The U.S. Census Bureau defines urban areas:  Core blocks and block groups with population density of 1,000 people per square mile.  Surrounding blocks with overall density of 500 ppmi 2  Range in size from 2,500 people to nearly 2 million people.  Rural is everything that is not urban.  Based on the 2010 Decennial Census:  59 million people live in rural areas (19%)  249 million people live in urban areas (81%) 5

Hermann, MO Population 2,515 New York-Newark Population 1.8 million

 These boundaries are only defined every 10 years.  Urban area boundaries don’t align with boundaries of cities and towns.  There is no governmental jurisdiction over Census defined urban areas.  Very limited sub-county data challenges more granular understanding, and resource targeting.  The most comprehensive data is at the county level.  All would agree that some “urban” places are really much more rural in character.

 Defined by the Office of Management and Budget.  Designed to be functional regions around urban centers.  Classification is based on counties.  Three classifications of counties:  Metropolitan, Micropolitan, Noncore  Based on size of urbanized area/urban cluster in central counties and commuting ties in outlying counties.

Core Based Statistical Areas MetropolitanMicropolitanNoncore

Usually, metropolitan is equated with urban and nonmetropolitan is equated with rural. So, if metropolitan is urban, then…

This is urban: Los Angeles, California Population 1.2 million

And so is this: Armstrong County, Texas Population 2,071 Part of the Amarillo Texas Metropolitan Area

And if nonmetropolitan is rural, then…

This is rural: Loving County, Texas Population 55

And so is this: Paducah, Kentucky Population 48,035

Most Counties are Both Urban and Rural! Coconino County, Arizona Population 127,450 Flagstaff Metro Area

Most metropolitan areas contain rural territory and rural people. In fact… 54% of all rural people live in metropolitan counties!

Distribution of U.S. Population by Urban and Rural Areas, and Core Based Statistical Areas, 2010

II. The global rationale for a “Regional Rural Innovation” strategy

The OECD New Rural Paradigm (2006) Old ParadigmNew Paradigm ObjectivesEqualization. Focus on farm income Competitiveness of rural areas Key target sector Sector basedHolistic approach to include various sectors of rural economies Main toolsSubsidiesInvestments Key actorsNational governments, farmersMultilevel-governance Guarantee an adequate attention to rural issues And empower local communities and governments Rural is not synonymous with agriculture Rural is not synonymous with economic decline

Modernising the rural economy NRP and ahead: – Identification toward a set of principles Differentiation based on rural characteristics – Low density – sparsely populated – Long distances – Lack of critical mass Need to enhance competitiveness – Rural areas integrated in global world Differentiated but integrated – Rural regions are complex territories – Non-core urban areas Promoting Growth in all Regions Urban to Rural Linkages Project “Innovation and Modernising the Rural Economy “

Enrique Garcilazo Regional Development Policy Division Directorate for Public Governance and Territorial Development OECD NACO WEBINAR Washington, 15 th January 2013 Promoting Growth in all Regions and Rural Development

OECD Territorial Reviews: A series of case studies of regional policy Among 34 member countries :  18 National Territorial Reviews ( +2 in process)  22 Metropolitan Reviews (+1 in process)  2 National Urban Policy Reviews (+1 in process)  6 Regional reviews (+2 in process)  5 review s on regional innovation systems  9+2 National rural Policy Reviews (+1 in process ) 24 Alemania, Mexico (2006) Finlandia, Holanda, Escocia (2007) China, Italia, España (2008) Quebec, Canadá (2009) Inglaterra (2010)

Thematic Reviews -- Rural  Factors of regional competitiveness (1)Empirical evidence -- General trends (2) Case studies –Field analysis –Questionnaires, –Peer reviewers, experts Policy implications: (3) Implementation Governance Linking Renewable Energy to Rural Development (15) RURAL-URBAN Partnerships Project (16)

OECD Regional Data-Base (RDB)  The RDB includes regional statistics on 5 major topics: –Demographic, Regional accounts, Labour, –Social and environmental indicators, Innovation  To facilitate comparability, regions are:  Classified in 2 Territorial Levels (TLs): TL2 Territorial Level 2 (337 regions) TL3 Territorial Level 3 (1708 regions) New regions: China, Brazil, South-Africa, Chile etc..  Classified by regional type OECD definition: (PU, I, PR)  Extended regional classification (PU, INC, INR, PRC,PRR)  Database can be directly accessed from the OECD  Statistical portal:  OECD eXplorer:  OECD MDB:

Promoting growth in all regions Is broader based growth economically viable? Does growth potential exist in some regions? Does it matter for national and aggregate growth ?

There is no single/unique path to growth…

Convergence forces in rural regions

Convergence forces in intermediate regions

The most dynamic OECD regions over average rank (1== highest)  population  pop density

Dynamism in rural regions and population trends

Concentration  high levels of GDP pc

Only 45% of metro--regions grow faster than the national average. Metro-regions appear to have entered in a process of convergence. …signs of inefficiencies appear in significant number of metro-regions… …but not necessarily faster growth

Contributions to aggregate growth depend on few hub regions… …the fat tail is equally important -- if not more -- to aggregate growth… 35

Contributions to growth OECD TL3 regions 36

Lagging regions contribute to national growth Lagging Regions Contribution to Aggregate Growth Overall, they contributed to 44% of aggregate OECD growth in In eight OECD countries lagging regions contributed more to national growth than leading regions. Bottom line: support for lagging regions need not be merely a “social” policy. They contribute a large share of national growth. 37

Analytical approach: Compare indicators relevant for regional growth b/w “growing” and “underperforming” group Population density GDP density Employment rate Unemployment rate Youth unemployment rate Patent applications Patent intensity Business R&D to GDP Government R&D to GDP Higher education R&D to GDP Primary attainment rate Tertiary attainment rate Connectivity in global network Productivity Infrastructure Economic mass/thickness of market economies of agglomeration Labour utilisation Innovation related indicators Human capital Geography/NEG

Performance of all “growing” regions associated …  Productivity  Human capital  Density

Performance of regions with low levels of development… …infrastructure and innovation related activities (co-invention within regions and with other regions within countries) are critical, in addition to human capital.

As regions move into higher levels of development… …human capital but in addition to adequate infrastructure, efficient labour markets and innovative activity are critical to enhance their performance.

As regions approach the production possibility frontier… …in addition to human capital dynamism is mainly associated with innovation-related activities and their connectivity within the global network of regions and agglomeration forces.

Persistence of inequality Infrastructure provision Leaking by linking The policy headache: isolated sectoral action may have unintended outcomes. Problem: lack of connectivity 43

with labour mobility Persistence of inequality Policy responses Human capital formation Brain drain 44 The policy headache: isolated sectoral action may have unintended outcomes.

The need for a differentiated approach Place based polices in the new regional paradigm are best suited for this task  Integrated approach – diagnosis is critical  Right level of intervention – local labour markets  A match between bottom and top down information and initiative is critical  Policy design and multilevel governance are key for a successful implementation 45

Infrastructure provision Policy responses Human capital formation Business environment Innovation Regional growth and convergence Towards a Multidimensional Response At the regional scale Many countries are reforming in this direction, but implementation is still difficult. 46 -Horizontal evidence? -Policies ? -Institutions ?

III. Is there a “rural” commitment in current U.S. domestic policy?

Policies and budgets are ultimately about visions and values.

“ What policy framework will best integrate rural and urban initiatives and programs, to advantage both ag and non-ag rural constituencies, their communities and regions, and enhance their children’s potential to thrive there in the 21 st century?”

1.Greater attention to asset-based development, much more broadly defined. Placemaking, married to economic development, must be the new paradigm. 2.The building of regional frameworks, appropriately configured, of sufficient scale to leverage these geographies and bridge these constituencies. (While we need rural and urban responses, their intersection is the future of enlightened public policy.) 3.As the Federal role reduces over time, greater attention to new governance / new intermediary support by the public sector. 4.Regional innovation policies which specifically target mutually beneficial competitive advantage, that rural and urban areas share. (i.e., Regional food systems, bio-energy compacts, natural resource- based / sustainability assets, “workshed” / “watershed” approaches, etc.)

5.Attention to the importance of working landscapes:  Arts / heritage / culture  Natural resources / tourism  Bio-energy / biofuels, entrepreneurial agriculture 6.Incentives to bridge innovation / entrepreneurship support systems, from urban to rural expression 7.Opportunities to address spatial mismatch issues in workforce / training across broader geographies, via “place-based” community / technical college collaborations, both sister schools and research universities. 8.Innovative funding approaches which enhance collaboration across state and local governments, particularly in cross-sectoral, regional experimentation.

IV. Rural imperatives, and signs of hope and progress!

Critical Internal Considerations  Wealth Creation and Intergenerational Wealth Retention  Youth Engagement and Retention  Social Inclusion and Social Equity New Narratives & Networks Knowledge Networks & Workforce Quality of Place Entrepreneu r-ship & Innovation Collaborative Leadership

V. Final Reflections: Why your work is so critical

Distribution of U.S. Population by Urban and Rural Areas, and Core Based Statistical Areas, 2010

“What lies behind us, and what lies before us are tiny matters compared to what lies within us.” --Ralph Waldo Emerson

Charles W. Fluharty President and CEO Rural Policy Research Institute 214 Middlebush Hall University of Missouri Columbia, MO (573)