Rural Development
Prof. Michael Cuddy
Dr. Catherine Murray
IDARI Training Programme
September 2003
Module Objectives
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Introduce theoretical concepts relating to rurality
and rural development.
Highlight problems arising in rural areas of CEEC.
Aid students in the writing of a report on the
existing conditions of rural CEEC.
Module Assessment
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Written paper on the conditions of rural areas in
their country (where the student will carry out
research).
Limit of 5,000 words
The paper should form a ‘current situation’ paper.
Overview of Module
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Theoretical considerations
Problems of Rural Areas
Market Failure in Rural Economy
Institutions of Rural Development
Issues arising in Central and Eastern European
rural areas
Agreeing framework for student’s report
Theoretical Considerations
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Complexity of rural areas
‘Rural’
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Spatial definitions (urban/rural divide)
Sectoral definitions (agriculture & traditional
activities)
Rural idyll (conceptual)
Administrative definitions (OECD, NUTS)
(1)
Eurostat NUTS Classification
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Densely populated zones : a population density greater than
500 inhabitants/km2,and a total population for the zone of at least
50,000 inhabitants.
Intermediate zones : these are groups of municipalities,
each with a density greater than 100 inhabitants/km2,not belonging
to a densely populated zone. The zone’s total population must be at
least 50,000 inhabitants, or it must be adjacent to a densely
populated zone.
Sparsely populated zones : these are groups of municipalities not
classified as either densely populated or intermediate.
OECD classification
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predominantly rural regions : over 50% of the population living in
rural communities;
significantly rural regions : 15 to 50% of the population
living in rural communities;
predominantly urban regions : less than 15% of the population
living in rural communities.
Also, according to their degree of integration with the national
economy, rural areas can further be distinguished as:
Integrated rural area
Intermediate rural area
Remote rural areas
Ireland: Population change
1996-2002
Theoretical Considerations (2)
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Rural Development
traditional economic definition of development refers to the ability
of a country to generate and sustain growth in GDP;
 The post-war definition of development has increasingly become
concerned with the reduction/elimination of poverty, inequality
and unemployment, as well as with economic growth. It
advocates perceiving development as a multidimensional
process involving the reorganisation and reorientation of entire
economic and social systems.
Aims of development must include:
 Increasing living standards, and impact positively on quality of
life
 Expanding the range of economic and social choices available to
individuals.
 Reducing inequality and exclusion.
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Theoretical Considerations (3)
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Rural Sustainable Development
Recognition that any development process must be able to be
maintained; continuity of process through time.
Extending concept of rural development to include:
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Economic considerations
Social considerations
Environmental considerations.
Integrating Ideas on Rural
Development
Sustainabl e Rural Development
Economic Efficiency
Social Equit y
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Ecological Integrity
Cult ural Identit y
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Socio-Econo mi c Forces
Env ir onmental Impact
Integrated Agricultural and Rural Development Policies
Emerging Problems in Rural
Areas
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Demand and Supply side Problems
Resource Markets (General Market Failure)
Physical and Social Infrastructure
Social Capital and Cohesion
Sustainability
Demand and Supply side
Problems
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Sectoral Dimension
Spatial Dimension
Spatial/Sectoral Interaction
Market Failure (Theory 1)
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Allocative efficiency
Production efficiency
Allocation through the Market
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Neoclassical paradigm (strict)
Neoclassical paradigm (liberal)
Alternative
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Institutional
Evolutionary
Neo-classical Paradigm
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General equilibrium
All markets in equilibrium
All markets cleared
Disruption of equilibrium
New equilibrium
Labour Market Equilibrium
W
L
Assumptions
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Core assumptions
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Methodological individualism
Rationality
Equilibrium
Non Core assumptions
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Competition
Agents knowledge
Use of formal modeling
Traditional market failure
 Public goods
 Externalities
 Competition
New Market Failure
 Absence of markets
 Imperfect information
Rural Issues 1
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Sectoral decline
Low income
Structural imbalance
Rural Issues 2
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Market failure
 Capital markets
 Labour markets
 Externalities
 Information
Rural Issues 3
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Centre/periphery specific
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Centrifugal - Access
- Transport costs
- Telecommunications
Centripedal
- Initial conditions
- External environment (natural and policy created)
- External economies (agglomeration)
- Internal economies (of scale)
Social Infrastructure
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Population decline
Ageing population and demographic dependence
Poor provision of services
Poor access to services
Reduced life opportunities
Rural poverty
Social Capital and Cohesion
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‘Social capital refers to features of social
organisation such as networks, norms and social
trust that facilitate coordination and cooperation
for mutual benefit’ - Robert Putnam, 1995
Resources available to people due to their
association or membership with society or a
community.
Investment required in social capital also.
Sustainability
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Issue due to conflicts over what sustainable goals are or
should be.
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"Development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs; not simply the
use of resources at a rate which could be
maintained without diminishing future levels, but
development which also takes social implications
into account". (Dictionary of Geography, Oxford
university press).
Institutions of Rural Development
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Institutions defined as ‘the humanly devised constraints
that shape human interactions’ (North, 1990 p.8).
‘Rule configurations or prescriptions that are commonly
used or known to order repetitive, interdependent
relationships between individuals, sets of individuals
(stakeholders, actors) and between individuals and actors’
(Gatzweiler et al 2001).
Institutions are the essence of social change - redefining
relationships among people and their environment.
Institutions of Rural Development
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Distinguish between the ‘agencies’ (or organisations) and
social norms.
These organisations are groups of people who are bound
by some common purpose to achieve objectives. They
provide a formalised structure for human interaction.
 The social norms also provide a structure for human
interaction, in a less formalised fashion.
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Both are important in understanding rural development
policy - operate simultaneously.
Relevance of Institutions to R.D.
(policy-centric view of institutions)
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Rural Development is a government/EU policy.
Politics and administration, or goals and means of
governmental achievement, cannot be separated.
What links them are the dominant institutions in
operation (both formal and informal).
Rural Development requires a change in the rural
economy - which in turn implies institutional
change within the rural society/economy.
Linking New Institutional Economic
ideas and rural development
New Institutional Economics
Collective Action School
Conditions under which
economic agents achieve
successful cooperation in
economic or political spheres
Car-sharing for rural transport,
overcome diseconomies of scale;
Partnership building
Transaction Cost School
Institutional Environment
Focus on power relations
within instituions e.g. private
property, market structure etc.
Institutional Arrangement
Focus on efficiency problems
due to institutions - specifically
imperfect information
Ownership of rural resouces;
Market Structure in rural areas;
Market Failure in rural areas;
Legislation relating to rural areas.
Imperfect information affecting rural
economy; e.g. within and about
rural markets;Information used as a
source of economic power - rent seeking
Institutions of rural development
There are many levels of rural institutions here distinguish between two.
 Formal - institutions based on existing
legislation. Identifiable within the legal
framework of the country/region.
 Informal - institutions arising due to cultural
factors or non-legal conventions between
individuals. May be difficult to detect.
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Formal Institutions of R.D (1)
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Rural Policy as an institution
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Intervention in the rural economy is itself an
institution - rather than taking a laissez-faire
approach.
EU policy
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Change in rural development policy markedly since
the (1988) publication of ‘The Future of Rural
Society’; the (1996) ‘Cork Declaration - a living
countryside’; the (1999) ‘European Spatial
Development Perspective’
Focus on ‘bottom-up’ development rather than
previous ‘top-down’ strategy.
Focus on local capacity building/empowerment of
rural communities.
Focus on ‘sustainable development’
Formal Institutions of R.D (2)
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Implementation procedures
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Who implements policy and how?
Subsidies - agricultural sector
Incentive Schemes - e.g. LEADER
State ownership of rural resources - e.g. National
Parks
Development Control - e.g. Planning Laws
Property/Ownership of rural resources
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Issue for CEECs
Land abandonment
Traditional and Informal Rural
Markets?
QuickT ime™ and a T IFF (Uncompressed) decompressor are needed to see this picture.
Rural Markets in Urban Locations?
illegal rural markets - dumping
Policy to improve infrastructure
Formal
Intervention
e.g.Transfer
of monies
to farmers
QuickT ime™ and a T IFF (Uncompressed) decompressor are needed to see this picture.
Institutional ‘lock-in’ in agricultural
policy? (Data from 1997)
REPS contracts as % of
utilised agricultural area
Formal Institutions of govt. intervention
- ‘farm improvement’ schemes
QuickT ime™ and a T IFF (Uncompressed) decompressor are needed to see this picture.
Formal institution of government
ownership of land/rural resources
State ownership - codified ‘rules’
over how to use resources.
Informal institutions of Rural
Development (1)
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Rural Development Practice ‘on the ground’
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Factors affecting rural development policy
implementation.
How is the policy communicated?
Role of information in rural development process.
Customs affecting rural development.
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Traditional work practices which may (marginally)
affect rural economy - e.g. practice of ‘rolling’ of
grass in South England - has no environmental/
ecological benefit but has a cost (petrol & time).
Sheep farming in West of Ireland - economically
unviable.
Informal institutions of Rural
Development (2)
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Culture affecting rural development.
Language (not necessarily verbal - codification)
 Embedded Institution
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No exchange without language - fundamental of any society
Administrative Language - relevant for farmers
Rural Local Institutional Setting
Consolidated behaviour of rural actors - climate of
cooperation or non-cooperation.
 Local history and traditions.
 Local rules - existence of dominant local
individuals/politicians.
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Customs of self sufficiency gardening
- Berry Picking in Ireland
Historical Tradition of burning heather
-management conflicts
QuickT ime™ and a T IFF (Uncompressed) decompressor are needed to see this pict ure.
Local Custom
Tory Island Institution of
land distribution
by ‘King’ of
Island
Historical set-up of villages
Aran Islands - Institution of land inheritance
QuickT ime™ and a T IFF (Uncompressed) decompressor are needed t o see this pict ure.
Institutions and innovation
Institution affecting rural landscape potato cultivation and consumption
QuickT ime™ and a T IFF (Uncompressed) decompressor are needed to see this picture.
Local Organisation formation
Local Partnerships as an institution
Conclusion
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Rural Development happens within a policy context?
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Institutional change in rural space at all levels.
Institutions exist on numerous levels.
Institutions change - through ‘innovation’ in the status quo.
Institutional change not necessarily better or good (or
evolutionary superior in Darwinian sense).
Difficult to establish pareto improvement in institutional
change.
 Incomplete knowledge of inferior/superior institutions.
 Normative judgement of institutions is difficult.
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Have dominant set of institutions at any given point in time.
CEEC Institution Exercise
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Group 1: Think of 5 formal institutions from different
country.
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Select one institution each (try to diversify institutions)
How do these institutions affect the rural economy/space.
Group 2: Think of 5 informal institutions from your
own country.
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Select one institution each (try to diversify institutions)
How do these institutions affect the rural development
process (or formal institutions of rural development).
Issues arising in CEE rural areas
(1)
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Rural Development (Sectoral/spatial)
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Surplus labour
Distribution of urban centres
Entrepreneurial activity
Innovation and innovation systems
Access to global markets
Business services
Physical infrastructure
Social Services
Demographic problems
Issues arising in CEE rural areas
(2)
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Institutional Issues
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Control and support system (SAPARD funds not
utilised in many CEECs)
Land ownership (restitution, abandonment)
Market system (instituting systems rather than
letting them evolve)
Planning and implementation
Social capital
Issues arising in CEE rural areas
(3)
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Farm and Agribusiness
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Productivity – weakness in physical and human
capital
Farm structure
Farm inputs
Marketing and processing of agricultural products
Issues arising in CEE rural areas
(4)
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Agri-related
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Alternative Production
Environment
Infrastructure
The rural economy 
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an assessment
Location in national and international context
Urban hierarchy
Access, energy and social infrastructure
Education
Sectoral activity (Agriculture, tourism, other services,
industry, other important local sectors)
Labour market (Demand and supply side)
Capital markets
Entrepreneurial activity
Public policy
Local influence on policy and decision making
SWOT analysis of each of above