Industry dynamics in rural areas

Background and Objective

The jewelry industry in Idar-Oberstein, the porcelain production in the Fichtel Mountains, and the textile industry in Muensterland are examples for regionally important industries that have lost much employment in the course of structural change. Research on drivers, patterns and effects of structural change is important to gain an understanding of rural economies, which are often rather specialized.  The goal of the research project is the identification of a) branches of special importance for the development of rural areas, b) rural areas that are especially impacted by structural change and c) determinants of regions’ resilience in processes of structural change.

Approach

The study is based on secondary statistics, i.e., employment by industries at the district level. The development of employment and firms has, for example, simultaneously been explained In an extended shift-share regression by industry structure and region-specific advantages and disadvantages. The analysis differentiated additionally by region type in order to assess possible differences in the affectedness of rural and urban areas, for example. The results serve as the basis for further analyses, in which above all the reasons for region-specific advantages and disadvantages are scrutinized. Qualitative and descriptive methods are also used in further and supplementary analyses since some differences can only be explained in the context of historic developments.

Results

The analyses so far confirm the most important theoretically derived expectations: The economy of prospering rural areas is carried above all by the production sector, despite its sinking employment share. The intangible knowledge that is crucial for its small and medium size firms is characterized by restricted mobility. Urban regions develop above all positively if they manage to become attractive to knowledge-intensive businesses and highly qualified employees. Due to the differences in the mobility of relevant knowledge, an equalization between Germany’s west and east is more likely to take place in urban than in rural districts. The greatest development chances for structurally weak rural regions are in the exploitation of dynamics that originate in the development of new markets and business areas.