Measuring the determinants of relative economic performance of rural areas

Abstract

This paper examines the determinants of economic performance of 149 English rural Local Authority Districts (LADs). A Three Stage Least Square (3SLS) estimation procedure was employed to jointly determine the influence of a wide range of indicators representing economic, human, cultural and environmental capital, as well as less tangible or ‘soft’ factors on three distinct components of economic performance: productivity, employment and labor market participation. The results reveal that a range of facets of economic and human capital, including the three key drivers of productivity ( skills, investment and enterprise), spatial factors ( peripherality and accessibility), and other key factors ( economic structure, government infrastructure, road infrastructure, and occupational health), are significant determinants of economic performance in rural areas. This study is of value since it proposes a method for modelling the determinants of economic performance which is transferable to other environments in the UK and beyond. In addition, it proposes a set of benchmarks of economic performance using readily available data, and highlights some implications for rural policy and several avenues for future research.