1. Assessment and recommendations
For more than 40 years, the OECD’s policy framework on rural development has helped guide member countries’ efforts to increase prosperity and improve the living standards of their citizens in rural places. This policy framework has provided a lens through which to evaluate effective policies and has played a key role in reshaping rural policies. It has also been regularly updated to reflect changing times, follow the organisation’s latest thinking and include the latest evidence-based analysis.
Rural Well-being: Geography of Opportunities presents the latest iteration on this policy framework, reflecting several important changes in rural development in recent years. Fully taking into account the variety of situations characterising rural communities, the new policy framework leverages improved data and analysis while broadening the scope from the economic dimension to encompass also the environmental and social dimensions of well-being. The new approach places the well-being of citizens at the forefront of its objective and recognises the diversity of rural places thanks to a deeper understanding of their diverse and complex socio-economic systems and their connection to cities. The framework also looks to the future and unfolding megatrends such as globalisation, digitalisation, climate change and demographic change. It reflects on how these trends will impact rural economies and reviews policy options to mitigate the challenges and capitalise on opportunities as well as to develop resilience against emerging crises. Finally, recognising the strong interdependencies between different stakeholders and the need for partnerships between government, the private sector and civil society to successfully implement policies, the Rural Well-being Policy Framework focuses on governance mechanisms, including the OECD Principles on Rural Policy.
This updated Rural Well-being Policy Framework comes at a time when the unfolding impact of megatrends, coupled with the shocks of the global financial crisis and COVID-19, are shaping the economic landscape of rural economies and are exposing the inadequacy of traditional place-insensitive policy solutions. Today more than ever, the distance between “winners” and “losers” feels ever-widening and growing segments of the population feel they belong to “places that don’t matter”, in some cases fuelling populist and anti-establishment sentiments. With rural development policy being a growing priority for OECD governments, Rural Well-being: Geography of Opportunities offers timely guidance focused on the well-being of citizens and the untapped potential and opportunities of rural places.
The Rural Well-being Policy Framework extends and refines the OECD’s earlier work, taking advantage of new analysis to reflect a greater degree of the diversity that exists in rural places for policy purposes. In place of an urban-rural dichotomy, the Rural Well-being Policy Framework identifies three types of rural from a rural-urban continuum: i) rural inside functional urban areas (FUAs); ii) rural close to cities; and iii) remote rural. The framework identifies the interactions between the three types of rural places and cities, each with stark structural differences, and distinct challenges and opportunities (Table 1.1). Understanding each of the three types of rural leads to the possibility of shared action and more effectively targeted policy responses.
The new framework broadens the scope of analysis. Looking beyond the usual economic factors such as productivity and income, it encompasses a multi-dimensional approach to regional inequalities and the environmental and social dimensions of well-being to deliver a more holistic, people-centred understanding of rural development.
The new framework also recognises that effective rural policies involve the engagement of a broad array of actors and multi-level governance mechanisms. A pooling of resources and capabilities across entities creates the ability to collectively accomplish what no individual actor can achieve independently. This demands the collaboration and engagement of governments at multiple levels, involvement of the private sector and civil society. To that end, the new framework provides tools for governments on how to better engage with relevant stakeholders, promote rural-urban partnerships and embrace multi-level governance. It recognises that rural people and businesses know their own needs best, suggests the use of new technologies to facilitate participation and underlines the need for meaningful engagement. Furthermore, it acknowledges urban areas as key partners in increasing rural well-being and highlights ways for effective partnership and collaboration between policy makers from different levels of government.
Lastly, the framework stresses the importance of designing rural policies through a place-based approach. This is a step beyond “rural proofing” (i.e. the application of a rural lens to help adapt sectoral or national policies to rural places) that recognises the inefficiency of non-coordinated policy making. Instead, policy design must be conducted with specific places in mind, considering the assets and leading industries for each, limits to labour mobility and linkages to cities that make each place unique.
In sum, rural well-being shifts from a one-dimensional to a multi-dimensional view of rural policies with:
Three types of rural – rural inside FUAs, rural close to cities and remote rural, along with the interactions between rural places and cities.
Three objectives – economic, social and environmental objectives and their interdependence.
Three different stakeholders – the government, the private sector and civil society.
The resulting framework is people-centred, placing the well-being of citizens at the forefront while providing a greater understanding of rural regions and their diverse and complex socio-economic systems (Table 1.2).
The Rural Well-being Policy Framework is also oriented towards the future, particularly the unfolding megatrends of globalisation, digitalisation, climate change and demographic change. It reflects how these trends will affect different rural communities in different ways and, while it considers policy options to mitigate the challenges presented by these trends, it focuses mostly only how to capitalise on the opportunities they present across several strategic domains important to the future well-being of people living in rural places.
A new internationally comparable territorial definition at the regional scale defining metropolitan and non-metropolitan regions integrates the fact that rural regions are diverse and have distinct policy needs. The new framework identifies three types of rural (e.g. non-metropolitan) regions: i) regions near a large city; ii) regions with or near a small/medium city; and iii) remote regions. Around 30% of the OECD population lives in rural regions and a clear message emerges from the distribution of people across these different types of rural region: the majority of rural populations have strong interactions with cities, as three-quarters of rural inhabitants live in regions closely connected to cities. Remote regions represent on average only a small share (8%) of the total OECD population but, in 7 OECD countries, they are home to more than 20% of the national population (e.g. mostly large, sparsely populated countries).
While important, many countries are facing population decline in rural regions. Metropolitan regions have been growing annually twice as fast as rural regions in the past two decades. As a result, in the period 2001-19, half of OECD countries with remote regions (13 out of 28) and 25% of countries with regions near a small/medium city experienced a population decline in those types of regions, as opposed to regions near a large city.
In addition to population decline, rural regions also face challenges raised by an ageing population. Elderly dependency ratios are higher in rural regions than in metropolitan regions in almost all OECD countries. This gap reaches 9 percentage points (p.p.) in 7 OECD countries. Amongst rural regions, the ones near a large city have the highest elderly dependency ratios (33%), followed by remote regions (31%) and regions with or near a small/medium city (31%). Between 2003 and 2019, remote regions experienced the largest increases in elderly dependency.
Although most of the OECD’s rural population lives within reach of cities, the “penalty of distance” in rural economies can be quite substantial. The economic performance in rural regions in terms of gross domestic product (GDP) per capita, productivity and employment rates on average is below that of metropolitan regions. In 2017, GDP per capita in rural regions was 13 p.p. below the average, 16 p.p. lower in labour productivity levels and 8 p.p. in employment rates. Amongst rural regions, the gap was the highest in regions near a small/medium city.
Recent economic shocks triggered by the global financial crisis in 2008 and the current COVID-19 pandemic have changed the economic landscape of rural economies. Rural regions, especially those far from cities, felt more strongly the effects of the 2008 global financial crisis, leaving many of them in a vulnerable position to face the economic recession caused by COVID-19.
Prior to the global financial crisis, rural remote regions were actually growing faster than other regions. This economic convergence process stopped and reverted in the post-crisis period. After the 2008 crisis, the regions near a city grew faster than other rural regions. Therefore, large cities and their surrounding regions have weathered the effects of the crisis better than other regions.
This drag in performance of regions far from cities coincided with an increase in regional inequality in almost all OECD countries. In 24 out of 28 OECD countries, regional inequality in GDP per capita increased in the post-crisis period compared to the pre-crisis period. This trend resulted from the faster rise of GDP per capita levels in top regions. Greece was the only country in which lagging regions converged with the top region (Attica) between 2017 and 2000 but this was due to the very weak performance of the latter.
Economic shocks have occurred amid large structural transformations affecting the development trajectories of all regions. Globalisation and the offshoring of manufacturing jobs to emerging economies with cheaper labour costs have gradually decoupled the production of tradeable goods away from central locations. This process has accelerated the rise of the service economy as the most important sector across OECD countries. Typically, the service sector now represents 80% of total value-added in OECD countries.
Rural economies in OECD countries have not escaped these trends and have seen their economic base shift from traditional activities towards activities connected to global value chains (GVCs) and the service sector. The service sector has increased its importance not only in cities but also in rural regions. In 2017, the share of employment in services in remote regions was 71%, only 4 p.p. below the share in metropolitan regions (75%). Nevertheless, many rural regions, especially those far from cities, are over-specialised in traditional primary activities (e.g. resource extraction). In contrast, top rural regions are specialised in high-value-added services.
A more integrated and globalised economy enables productivity gains. These gains, however, appear to generate more jobs in rural regions close to large cities. In the majority of rural regions (57% for remote, 51% for near a small city and 68% for near a large city), productivity gains also generated employment gains. However, in some rural regions, productivity gains were concomitant with labour shedding. In fact, rural regions near small/medium cities were the only regions that had a negative contribution to employment growth (-0.9%) in the decade following the global financial crisis, while regions close to large cities and remote regions had small but positive contributions (1.7% and 7%). The bulk of employment growth, 92%, occurred in metropolitan regions during this period.
In addition to the current trends shaping the performance of rural regions and well-being of citizens, a number of structural transformations, including the three megatrends (digitalisation, demographic and environmental change), are also creating opportunities and challenges in rural regions (Table 1.3).
The analysis and the global context create a number of opportunities and challenges for rural regions spanning economic, social and environmental dimensions. To address these challenges and harness the opportunities, Rural Well-being Policy Framework identifies a number of priority areas to prepare rural regions for the future.
Raise productivity
Rural regions face challenges generating productivity due to their lack of density and economies of scale. Such low-density regional economies have seen decreased and fragmented internal demand, coupled over the past two decades with competitive pressures from low-wage emerging economies. Moreover, because low-density regions produce a limited range of goods and services, they are more vulnerable to industry-specific shocks than the more diversified economic base of larger and denser regions.
Upgrading skills and knowledge is a priority to deal with upcoming changes in technology, demography and climate as well as to increase the attractiveness of rural regions to balance out-migration through improving quality of life across all three dimensions. The share of workers with tertiary education (i.e. a university degree) is currently lower in regions characterised by low-density economies. Moreover, students in rural schools tend to underperform in secondary education outcomes in comparison to students in cities.
To mobilise their assets and overcome productivity generation challenges, rural economies need to fully use opportunities related to digitalisation, enhance their links with urban areas and further increase their added value in tradeable activities. Better links with urban regions can unleash benefits from the proximity to agglomeration economies, including innovation spill-overs and greater movement of workers and ideas. Increased exports are an especially important source of productivity gains for remote regions. Notably, greater participation in high value-added tradeable activities offers the opportunity for rural economies to overcome challenges associated with their small market size and to trigger innovation based on exposure to global competition and GVCs.
Key strategies for rural economies include:
Adding value to tradeable activities by:
Supporting smart specialisation strategies through greater diversification among related sectors or activities in rural economies.
Enhancing innovation by strengthening the links of rural economies with urban regions and GVCs, and generating common environments that concentrate firms, entrepreneurs and research institutions by considering the special potential of digital technologies.
Increasing productivity of rural SMEs by improving the local business environment (e.g. simplified administrative process), supporting co-operation of SMEs with large firms and providing specific support and training for women in enhancing entrepreneurship capacities.
Internationalising SMEs by improving networks and connections with external markets (e.g. participation in international fairs and with business organisations).
Retaining more value in rural communities by ensuring competitive regulation for local economies to reap benefits from foreign investment and promoting local benefit-sharing policies (monetary and non-monetary), including capacity-building activities for local firms, promoting quality standards and training programmes.
Strengthening rural skills by improving collaboration between public authorities, local businesses and not-for-profit organisations to ensure local education and training match the current and future needs of rural firms and harness digital technologies to support lifelong learning for rural youth and experienced workers.
Design forward-looking policies to increase resilience
Megatrends such as digitalisation, demographic and climate change as well as ongoing COVID-19 pandemic effects are creating new challenges and opportunities for rural communities. To increase rural resilience, innovation and technological change can be leveraged to create new solutions for rural regions so they can overcome their remoteness to markets, higher transportation costs and lack of critical mass. Innovation in rural economies often occurs through adaptive measures that try to negate market and policy failures (in terms of government service provision), with entrepreneurs in rural regions often creating innovative products and processes through an aggregation of smaller changes, such as incrementally learning by doing.
Among other initiatives to promote resilience, policy makers should take into account that innovation occurs differently and has a different impact in rural areas than in densely populated areas. Future-looking policies should focus on skills forecasting and development, reducing market frictions, strengthening the adaptability of workers and ensuring the social safety net. Likewise, regulations should allow local communities to take advantage of technological changes (drones, 3D printers) and focus on providing the conditions to encourage networking and diffusion of practices, rather than creating precise targets. These policy targets should be reviewed on a regular (pluri-annual) basis incorporating consultation, particularly with civil society, trade unions and businesses from rural communities. Importantly, a concerted effort to communicate forward-looking support mechanisms to rural entrepreneurs and communities can improve the effectiveness of a forward-looking environment.
Make the most of connectivity and digitalisation to harness rural opportunities
Though there has been a strong reduction in the gap of broadband coverage between rural and urban areas in recent years, the quality (primarily speed) of the connections remains significantly weaker in rural areas. In addition, data available across European countries reveals that individuals living in rural regions strongly lag behind their peers in cities with regard to their level of digital skills. Addressing this digital gap is key because the economic and social challenges of many rural regions are fundamentally linked to economic remoteness.
The deployment of information and communication technology (ICT) and digital infrastructure can play a key role in bringing rural regions closer to markets and services. While in some countries, including Iceland, Luxembourg, the Netherlands and Switzerland, access to high-speed broadband in rural areas is similar to the national average, a significant gap remains present in other countries such as Finland, Italy, Spain and Sweden.
Beyond accessibility, to fully leverage technology for economic opportunities and improve well-being, many rural regions will also need to overcome a gap in digital skills. The ongoing COVID-19 pandemic could accelerate the need for digitalisation and give rise to a new urgency in addressing shortcomings of ICT infrastructure as more people than ever are working from home and students around the globe engage in distance learning. This can be a unique opportunity for rural regions to bridge the digital divide and seize new opportunities for their economies and people.
Deliver sustainable services to ensure inclusive rural places for all
Driven by migration patterns, population changes are shaped by regional differences in fertility and mortality. Remote regions face a strong depopulation trend, which reduces the economies of scale needed for delivering quality services (health and education) in a viable way. This has been reflected in the closures of rural hospitals and the consolidation of rural schools.
A growing elderly population also increases the need for age-related goods and services in rural regions. By 2050, nearly 30% of the population in European regions outside of metropolitan areas is expected to be 65 years old or older. Current elderly dependency ratios in rural regions – the share of the population aged 65 and over as a percentage of the population aged 20-64 – stands already at 29% on average and is higher in rural remote regions. Furthermore, many people in rural places already face greater difficulties in accessing health and social care services. Geographical distances and less developed transportation services amplify these challenges as people’s mobility or cognitive function often decreases with age.
Integration of public services is thus key to enhance the availability of high-quality public services and thus the attractiveness of rural regions. Furthermore, the COVID-19 pandemic demonstrated the usefulness of access to digital health and education services. Different forms of integration include colocation, collaboration, co-operation, and co-production:
Colocation: integration that locates many services or agencies in one building.
Collaboration: agencies work together as part of a network to share information and training.
Co-operation: entails different levels of government communicating and working together on multi-agency teams.
Co-production: involves community and non-profit groups in providing services. By partnering with citizens and local organisations, public service providers can ensure products and programmes reflect the needs of the community.
Make rural communities attractive for youth, the elderly and newcomers
Rural communities face challenges in attracting newcomers and in retaining the people who live there and making the most of their talents. While OECD remote rural regions experience the highest fertility rates among all type of regions, young people tend to leave and those who remain, including traditionally underrepresented groups such as Indigenous Peoples, face lower levels of employment than their peers in cities. Population projections for Europe show that more than half of regions are expected to lose population by 2050 and half of EU countries will have to manage population decline in remote regions. Population losses shrink the local tax base and make it more difficult to provide public services. Attracting skilled migrants, young people and especially women to rural communities requires a strategic and a tailored policy approach. People will only come and stay in places if they offer the potential for personal and professional development.
In addition, ensuring the social well-being of elderly people offers opportunities for economic development. While rural economies are facing a shrinking labour force, developing and testing “silver” services in rural places is an opportunity to increase the economic inclusion of the elderly population and can attract investment to rural economies. The consumer spending power of elderly people is significant. Technological innovations focused on living well as we age are at the heart of this market.
Elderly people also bring personal and professional assets that are important for rural regions. Older workers bring institutional knowledge, social maturity and stability and can pass on business relationships to younger workers. This is important for newcomers who want to set up businesses in rural places and need help navigating new environments. Furthermore, retirees, who have free time, can be vital in contributing to voluntary work and help mitigate gaps in regional support structures including childcare or integration of migrants.
Key strategies to ensure rural places are both attractive and inclusive for all ages include:
Developing targeted immigration programmes that help promote rural life to newcomers, connect them with employment opportunities and provide local support services to assist with their integration into the community and retention.
Enhancing the quality and availability of ICT. New technologies can provide an alternative employment pathway for young people and migrants through new forms of economic activities and jobs in rural regions. These include tourism, services (marketing, design), niche manufacturing and food production.
Developing services related to maternal health, childcare and integration to help young parents and especially (migrant) women remain active in the workforce.
Improving communications on the benefits of rural amenities such as lower cost of living and closeness to nature. Working towards building a brand that highlights the progressive and modern aspects of rural places.
Providing special teaching and leadership to young rural populations from different backgrounds and supporting co-business and development of networks.
Developing “silver” services that address challenges faced by the elderly population including in health, transportation and social isolation.
Providing pathways for older people to continue to make contributions to rural communities and economies making use of their knowledge and business relationships, including through volunteering opportunities where needed.
Investing and supporting in social innovations that help to find solutions to societal challenges and enhance social support networks and trust amongst population groups at the same time.
Put rural regions at the centre of the transition to a low-carbon economy
Rural economies are pivotal in the transition to a low-carbon economy because of their natural endowments and specialisation in resource-based industries. Climate change is already affecting the agriculture, forestry, fisheries, mining and energy sectors due to dislocation and costs associated with responding to the increasing frequency and intensity of extreme weather events. To adhere to the goal of the Paris Agreement – limiting global average temperatures rising to only 1.5°C degrees compared to pre-industrial times – emission reductions need to go hand in hand with safeguarding the world’s carbon sinks and creating and investing in new methods of carbon removal.
Rural land is fundamental to absorbing carbon from the atmosphere. Forests and wetlands function as natural carbon sinks – trees and other vegetation absorb large amounts of carbon dioxide from the atmosphere (equivalent to almost one-third of carbon dioxide emissions from fossil fuels and industry). Reforestation, soil carbon sequestration, as well as bioenergy with carbon capture and storage can facilitate shifts to sustainable land use. Linking these efforts to rural development strategies can help generate benefits for local communities and create incentives to facilitate the transition to a low-carbon economy.
Policy makers need to consider environmental sustainability along with economic and social policy objectives. The concept of a “just transition” is that developments towards an environmentally sustainable economy need to be managed in a way that contributes to job creation, job upgrading, social justice and poverty eradication. The International Labour Organization (ILO) estimates that a transition to more sustainable economies could generate up to 60 million new jobs worldwide over the next 2 decades.
Rural places can employ a number of proactive strategies to support a just transition to a low-carbon economy. This can include developing new industries such as ecosystem services and resource extraction needed for renewable energy technologies. Rural places can also identify new ways to add value to natural resources and waste products through circular and bio-economy approaches.
Key strategies to make the most of the transition to a low-carbon economy in rural places include:
Facilitating the development of renewable energy that can benefit rural economies by integrating it within a local development strategy, identifying synergies with other sectors (e.g. agriculture and forestry) and linking it with local supply chains.
Identifying ways to capture the value of positive externalities such as ecosystem services including fresh water supply, storm and flood protection, and pollination. This also includes payments for environmental management and carbon offsets.
Promoting sustainable land use and resource extraction as part of the circular and bioeconomy including grants and loans to support capital investment, changes to regulatory frameworks, brokering and facilitating relationships between producers and consumers, investing in research and development with local universities, as well as effective land use policies, mechanisms for local benefit-sharing and working with local communities.
Rethinking transportation for rural dwellers. Considering population density and reliance on cars, solutions need to focus on alternative and technological innovations to reduce emissions as well as infrastructure development.
Working with regions dependent on carbon-intensive sectors to develop new economic opportunities and managing social consequences, including support for SMEs, investing in digital infrastructure, retraining and employment pathways for affected workers and setting up social support groups.
As rural policy making is cross-cutting by nature, the governance of the different governmental and non-governmental actors is fundamental. Policy interventions that target administrative boundaries or economic sectors in silos miss opportunities to unlock synergies and meet broad policy objectives for rural regions and countries. Recovery from external shocks, such as the 2020 COVID-19 crisis, calls for a greater multi-level governance and stakeholder co-ordination as identified in the OECD Principles on Rural Policy adopted in 2019 by the Regional Development Policy Committee.
A multi-level governance framework encourages different levels of government to engage in vertical (across different levels of government), horizontal (among the same levels of government) or networked co-operation in order to design and implement better policies.
Horizontal co-ordination across levels of government involves an approach in which policy makers mainstream rural issues across all policies to ensure rural needs are taken into account. A sound rural proofing approach should involve not only deliberately reviewing new policy initiatives through a rural lens but also ensuring policy complementarities among different policy strategies. Other important aspects to take into account for successful co-ordination among governments include:
Identifying the right scale of intervention by adapting policies and governance to functional geographies. According to the 2018-19 OECD institutional survey, for most OECD countries (80% of surveyed countries), the rural definition for policy making recognises the heterogeneity of rural areas. About 51% of OECD countries consider at least 3 types of rural areas (mixed rural/urban areas, rural areas close to cities and remote rural areas).
Setting a clear leadership role for policy co-ordination on rural issues to better integrate rural policies, promoting synergies and upgrading the concept of rural development at all levels within the country and beyond. While OECD countries tend to have more than one ministry in charge of rural development, in most cases (62% or 21 out of the 34 surveyed countries), the lead ministry on rural policy is related explicitly to agriculture. To overcome a sectoral bias and siloed policy making, many OECD countries have established an inter-ministerial committee or body to define rural development policies. Most OECD countries (85% or 29 out of 34 surveyed countries) have established an inter-ministerial committee in the form of advisory councils, platforms, networks or presidential committees.
Strengthening inter-municipal co-operation arrangements between regions or municipalities, including cross-border co-operation. For this, some OECD countries have established institutionalised municipal co-ordinating bodies at the regional level or voluntary inter-municipal co-operation mechanisms. Other countries have developed inter-municipal development agencies to support municipal governments in improving the business environment and well-being locally.
Promoting rural-urban partnerships to take advantage of functional links. These links include economic and demographic linkages, delivery of public services, exchange of amenities and environmental interactions.
Vertical co-ordination refers to the linkages between higher and lower levels of government, including their institutional, financial and informational aspects. While institutional co-ordination mechanisms vary among countries, all types of approaches aim for more effective sharing of information and objectives. In many OECD countries, a first step of co-ordination is through the development of national development plans or national plans for regional or rural development. Other instruments can include contracts between levels of government, including internationally (i.e. in regions that cross national boundaries), national-level regional development agencies, national representatives in regions, co-funding agreements or consultation fora.
Multi-stakeholder engagement and a “bottom-up” approach for rural policy are key ingredients to ensure sustainability and local ownership of rural policies. With the deepening of globalisation, rural regions increasingly feel that their requirements are overlooked in policy making. New technologies, fiscal consolidation efforts, socio-political changes, declining levels of trust and the COVID-19 crisis have increased demand for government transparency, accountability and a movement beyond a provider role towards a partnering relationship with citizens and the private sector.
Greater involvement of local actors in policy design and implementation requires recognising a different vision of development for rural places and in turn adapting the strategies to involve citizens, private sector and civil society in policy making process. Countries and regions have adopted different approaches to engaging local actors, varying from basic communication to full-co-production and co-delivery of policies. Engagement strategies include:
Citizen engagement: participative and open budgeting, co-production of social service delivery, fora or policy summits.
Private sector engagement: public-private partnerships and platforms for dialogue.
Collaboration with higher education institutions: partnerships to co-produce regional and local plans, programmes to support skills of public staff and support the local innovation strategy.
