Rural Area Development in a Growing Economy

Abstract

THIS PAPER examines the prospects of the continuing Rural Development Program and the new Area Redevelopment Act in resolving the profound geographical differences in labor factor rewards, whether within or outside the agricultural sector. These substantial differences have persisted in the United States during all of the 20th Century, and it is in this long-run context that we approach the problem. We are concerned with the analytical aspects of rural development in an economy in which persistent full employment in urban centers has not been characteristic during the last 60 years, and in which underemployment in rural areas continues to be characteristic. We conceive that this occurs in a dynamic, mass-consumption, and-in the Rostovian sensetechnically mature economy. For our purposes, we define economic development as applied to an area or sector of an overall economy, such as that of the United States, to be the achievement of increased income per capita and, if incomes are presently relatively low, progress toward attainment of real returns for the economic use of comparable factors equivalent to those realized on the average in the economy as a whole. We take as the best indication of such achievement equivalent labor incomes to persons of comparable labor capacity. We examine (a) the appropriate size and distribution of local development areas, (b) the relevance of macro-variables in explaining the existing geographic differences in labor factor rewards, and (c) the need for a model that will deal adequately with local factor income in a situation of less than full employment, coupled with downward inflexibility of wage rates.