Rural Population Growth, 1950-1990: The Roles of Human Capital, Industry Structure and Government Policy
Tzu-Ling Huang and Peter Orazem

Although the overall rural population has been slowly increasing, the rural farm population has fallen to one-tenth of its 1900 level. If a strong farm economy is necessary to sustain rural communities, then the farm population decline is a threat to the viability of rural communities. The concern among policy makers is that the decline in the farm economy will lead to a decline in the rural population, eroding the ability of these communties to provide public services necessary for their citizens. Eventually, the fear is that these communities will become too small to be self-sustaining and will disappear. Another cause for concern is the substantial variation in population growth rates across counties, so that some counties have shrunk substantially even as others have grown.

This paper examines the underlying causes of growth and decline in rural county populations over the 1950-1990 period. The analysis is conducted for the working age (21-64 years) rural population as a whole, and also separately for the farm and nonfarm populations. The study uses Census data on a sample of 306 Southern and Midwestern counties which were designated as rural in 1950. The data is applied to a model that examines the effects of income, human capital, local amenities, cost-of-living, government tax and expenditure policies, and job search and commuting costs on the working-age population.

The factors that best explain differences in rural county population growth rates are

• the level of employment diversification
• average rural income
• average education level
• distance to a major city.

The analysis shows that:

• Other things equal, counties with higher average incomes grow faster.
• Counties with more highly educated populations grow more slowly since the incentive to leave rural areas increases with education.
• Rural counties benefit from proximity to an urban labor market and from a more diversified local economy.
• Younger populations are more sensitive to these factors than the population generally.
• Local government fiscal policies have no effect on population growth. It seems that the although locally provided government services make a place more attractive to live in, the taxes needed to finance these services counteract the effect.
• Higher average farm incomes tended to slow the decline of the county farm population.
• Similarly, nonfarm populations grew more rapidly in counties with higher average nonfarm incomes.
• Higher nonfarm incomes had no significant effect on farm populations, while higher farm incomes led to declining nonfarm populations. This suggest that nonfarm population growth does not depend on a strong farm economy, nor does farm population growth require a strong nonfarm economy.

The results of the study suggest that the welfare of rural areas does not depend on the welfare of the farm economy. There is evidence to suggest that rural areas will benefit from an effort to diversify the rural economy. However, more local government spending financed by local taxes will not lead to higher population growth.

Summarized by Romana Khan
For more information contact: Peter Orazem

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