The Power of Knowledge in Building Strong Rural Communities

1. The Power of Knowledge in Building Strong Rural CommunitiesPresented atAlberta Rural Development Conference: The Power of Knowledge Edmonton (Leduc), Alberta September 29, 2011___________ Mark Partridge Swank Professor in Rural-Urban Policy The Ohio State University http://aede.osu.edu/programs/Swank/

2. Outline: Knowledge is King • Today’s moral is that the best strategy is using the assets inside your community. • Two community assets I will stress: • Your people and your businesses. • Provide the right incentives, knowledge and skills for them to thrive. • Leverage your colleges and existing institutions such community organizations to create the right local environment.

3. Outline: Knowledge is King • Focus on attracting the right people and less on attracting (“bribing”) outside firms. • “Bribing” outside firms is offering them a better deal than local businesses who don’t threaten to leave. • Trying to lure outside firms with incentives and subsidies is typically ineffective. (Partridge and Olfert, 2011; Goetz et al., 2011). • Make it that outside firms want to come to your great environment for people and businesses. • I am not ruling out good marketing.

4. State employment growth (2006-07) on announced per capita million-dollar facilities (2005)

5. Outline: Knowledge is King • People worry that rural areas are doomed without outside intervention. • However, nonfarm rural population is quite stable. Rural areas can prosper even if agriculture is smaller.

7. Outline: Knowledge is King • With this good foundation, your community will have the best chance to thrive. • SIMPLE STRATEGY! Be patient and build from within while leveraging local and regional assets.

8. How can Alberta’s regions successfully compete globally? • 1. Education and entrepreneurship are local forces that promote prosperity. • 2. Resilience to shocks. • Ongoing global economic sluggishness. • Alberta’s exposure to natural resources produces great wealth, but creates huge risk and variability. • Alberta is an overachiever. • Alberta faces the prospect of huge shocks and risks. • E.g., Not just the price of commodities, but climate change and the whims of U.S. policy.

9. Alberta Annual Oil and Gas Industry Investment, 2000-2009 Source: Government of Alberta: Office of Statistics and Information.

10. Why the Race for Knowledge? • Individual earnings significantly rise with knowledge, skills, and education.

11. Government of Alberta: Office of Statistics and Information.

12. Why the Race for Knowledge? • This understates an individual’s gain to education as employment rates rise and unemployment rates fall with education. Source: OECD, 2010. • So they are more likely to work, and among those working, they are more likely to earn more. • Educated workers suffer less in downturns in terms of unemployment—more resilient.

13. Why the Race for Knowledge? • Good for people, but what about communities? 3. There are ‘social’ gains from greater education. People who work in areas with more education have higher earnings themselves • (Source: Moretti, 2004). • Knowledge spillovers. 4. Places with a more educated population grow faster in terms of jobs and people. • (Source: Simon and Nardinelli, 2002; Glaeser and Shapiro, 2003) • In Canada, the growth inducing effects of education hold in both urban and rural areas. • Source: Partridge et al., 2007.

14. Why the Race for Knowledge? • Summary: Communities with a more educated population are richer, grow faster, have lower unemployment, and have greater resilience to withstand shocks. • What about rural Alberta? • Rural Alberta does not stack up well for university graduates, but it does well for college graduates. The key is to provide access for college education in rural Alberta.

15. Alberta Educational Attainment: Urban and Rural Government of Alberta: Office of Statistics and Information.

16. How Rural Alberta can win race for Knowledge. • Alberta’s colleges and universities are key for rural economic development, especially colleges. • Alberta’s colleges need sufficient branches to make post-secondary education accessible for rural Albertans and to provide other services for economic development. • They are less a source of innovation but more a source of educating the rural workforce. Business can count on a capable workforce.

17. How Rural Alberta can win race for Knowledge. • Also, I will outline other areas colleges can play a role. • An added benefit is they also employ the type of workers that create knowledge spillovers and their spouses are likely capable workers as well.

18. How Rural Alberta can win race for Knowledge. • Alberta’s colleges can be the clearing house for local rural economic development. • Why—rural communities often lack the critical mass to coordinate their economic development. • Colleges already work on the regional scale that is necessary for coherent rural economic development. They unify regions.

19. How Rural Alberta can win race for Knowledge? • Colleges are also the institutions that create ‘public-private’ partnerships for economic development. • They can spearhead business training and provide incubators. • Alberta’s colleges and universities can coordinate training workshops for local officials from teaching best practice to teaching finance and tax policy.

20. How Rural Alberta can win race for Knowledge? 21th Century will belong to places that use their knowledge to leverage their assets. • Rural communities should be attractive to knowledge workers • Quality of life, pleasant environment, sustainable development—this is good economics! • Attract return migrants in their 30s after they have seen bright lights.

21. Good Strategies--cont Business retention and expansion is better than tax incentives for outside investment. Building Entrepreneurship • Small businesses and self employment are strongly associated with growth in rural Canada. (Partridge et al., 2007) • They are an internal engine of entrepreneurship. • Small businesses buy locally and they are less likely to move or outsource. • Build a more diverse economy that is resilient to shocks (Partridge and Olfert, 2011). • Innovation comes from small firms.

22. Good Strategies--cont • Promote small business entrepreneurship by: • Business, Retention, and Expansion • Build networks and identifies strengths and weaknesses in a community. • Treat all businesses alike. • Government can help by building larger lending pools to reduce credit risk. • If you build a good climate for investment, your own businesses will thrive and STAY!

23. Business Retention and Expansion • Take advantage of farm entrepreneurship. Research has found a greater farm share is positively linked to nonfarm entrepreneurship. (Source: Stephans and Partridge, 2011, in print). • Today, farmers are great role models • 1. Tied to land—not outsourcing to China. • 2. Has experience managing medium sized business and has developed entrepreneurship. • 3. Understands futures markets, global markets, exchange rates, knows how to manage capital. • 4. Has financial wealth to invest.

24. Good Strategy: Leverage Regional Strength? Recognize rural-urban interdependencies • In 1950, communities detached from neighbors • 21st Century communities are linked in webs • Growth spreads out a hundred of miles from a city as small as 30,000. • Source: Partridge et al., 2007 • If someone can commute, they shop, utilize health care, participate in service organizations, etc. • Regions share common interests and the gains should be exploited regionally.

25. Percent of Local Labour Force Commuting to Edmonton CMA—CCS Level Data Source: See notes to the slide

26. Percent of Local Labour Force Commuting to Brandon CA—CCS Level Data Source: See notes to the slide

27. Trade Center Hierarchy Evolution, Saskatchewan, Canada 1961-2001 Source: Stabler and Olfert. 2002. Saskatchewan’s Communities in the 21st Century.

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29. Rural-Urban Shared Fates--cont • Economists contend that gov’t jurisdictions should reflect common interests. • Economic development • Tax sharing of common economic gain to share costs • Environmental costs and sprawl • Infrastructure is inherently regional

30. Example of Action • Regions that realize they are linked will have a competitive advantage in the global economy. • Lower taxes, better infrastructure, better public services, stronger economic development • Just being a little more competitive will shift capital from around the world at the click of a mouse. • Regionalism is the real sleeping giant for rural communities for sustainability. • Again, a linking force is colleges and universities.

31. What you don’t want to do! • Don’t try to pick the next hot industry. Be sure hot industries/firms want to be in your community. e.g., Seattle 1978 and Microsoft. • Economists say that governments can’t pick winners but losers know how to pick governments. • Don’t follow the latest fads—e.g., green jobs, innovation clusters, biotech, high-tech, alternative energy, etc etc….

32. Reality Check • No Guarantees!! Not all regions will succeed! • Even doing the right things is not sufficient when conditions are unfavorable. • Consequences of pursuing bad policies are high costs and it may prolong the ‘misery’ because people will be less likely to adjust by finding better opportunities.

33. No Silver Bullet

34. Future Challenges for Regions • Globalization is likely to increase • Good: more market opportunities successful • Bad: more competition and threat of outsourcing, for which rural areas are vulnerable. • Technological innovations can change a region’s competitive advantage for good and bad—by definition hard to predict. • Budget realities, austerity, and prolonged global sluggishness.

35. Future Challenges for Regions • Energy prices—the specter of high oil prices remain—costs of transportation and production would fundamentally change. • Climate change will alter regional attractiveness for households and firms. • Attractive climates as places to live will shift • Agricultural production patterns will shift • Access to water, essential to many production processes may become more critical • Goal is to make your community a safe haven for these emerging challenges.

36. Conclusions • Build from within your community as the best strategy for success. • Leverage your colleges as a source of educating your populace, retaining and expanding your local businesses, training entrepreneurs, and to be the focal point of regional efforts to promote growth. • Leverage your broader regions to do things you can’t effectively do alone.

37. Conclusions • Fostering local entrepreneurship is much better than hoping an outsider will come in and ‘save’ your community. In your community is a wealth of good business ideas, which include the agriculture community. • No sure plan! • Future challenges are immense—but wise communities can make these manageable or turn them into opportunities.

38. Thank you • Presentation will be posted at The Ohio State University, AED Economics, Swank Program website: • http://aede.osu.edu/programs/Swank/ • (under presentations) 38

39. Appendix Slides

41. Great diversity in rural America: 41

42. 1990/91-2006 North American Population Growth 42 42

43. Conceptualizations of Competitiveness The Porter Diamond Framework (Porter, 1998)

44. NCC Competitiveness Pyramid Source: National Competitiveness Council

45. WY’s greater natural resource intensity did not produce faster growth