| From 1930 until 1980 rural per capita income as a share of urban income increased from 43% to near 80%. In the 1980s, the rural population of the U.S. experienced a retrogression in relative economic well-being for the first time since the Great Depression with the rural income share falling to near 70% of urban income. There are two broad explanations for this divergence in income. The structural explanation posits a dominant shift in the spatial organization of the economy--a shift in which the advantages of agglomeration and urbanization lessened the cost advantages of rural production. The implication for the income prospects of rural areas is dire and long-lasting. In contrast, the macroeconomic explanation sees income divergence as a confluence of short-term effects impacting rural areas more severely than urban areas. In this view, the declining relative income position of rural areas is seen as a short-term anomaly in the process of regional income convergence.The goal of the dissertation is to determine the relative importance of macroeconomic and structural factors to rural/urban income divergence in the Upper Mississippi Valley states of Illinois, Iowa, Minnesota, Missouri and Wisconsin. In addition, various structural factors thought to inherently disadvantage rural areas are critically examined using case analysis to identify factors amenable to policy intervention.The analysis provides little support for macroeconomic causes of rural/urban income divergence. While rural areas were more adversely affected by the deep recession of 1982, this disadvantage dissipated by the end of the decade. The industrial restructuring of rural and urban areas provides a stronger, but still tenuous, explanation of the phenomenon. The growth of employment in higher skilled industries was more rapid in urban areas. However, rural gains in these same areas suggest that rural/urban differentiation resulted more from the degree of industrial change rather than its character. Finally, results from the case study confirm the decreased importance of cost competition. Production premised on the low cost advantages of rural areas likely suffered a serious devaluation. However, rural capability to compete on non-cost factors suggests that the disadvantage is circumstantial, not inherent, to rural production. |
