Rural Prosperity in a Knowledge Economy

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Rural Prosperity in a Knowledge Economy
Joseph Cortright
September 2002
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Overview

• Reckoning Rural Knowledge Assets
• The Death of Distance Competing in a Global
  Economy
• The Dearth of Difference

3
Knowledge Economy Basics

• Knowledge drives growth
• Knowledge gets created in places
• Specialization (Marshall-Arrow-Romer)
• knowledge is in the air Marshall
• learning by doing Arrow
• Diversity (Jacobs)
• juxtaposition and interchange
• Entrepreneurship (Schumpeter)
• Tolerance for Change (North)

4
Weak Rural Knowledge Assets

• Non-Metro Share of
• Population 19.6
• College-Educated Adults 12.3
• Patents 5.7

5
Educational Attainment Gap Widening
Adults with 4 year degree
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Knowledge Becoming More Urban

• In the 1990s, Metropolitan areas accounted for
• 94 of the growth in number of college-educated
  adults
• 94 of the growth of patents

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Smart, young workers drawn to Metro

• In Oregon (2000)
• Non-Metro Counties have
• 40 of working age population, but only
• 12 of college-educated 25-34 year olds
• College-educated 25-34 year olds
• 7 of metro workforce
• 1.5 of non-metro workforce

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Metro Areas Attract Talent

• Creative Class is drawn to certain metros--R.
  Florida, CMU
• Power Couples--households with two
  college-educated adults--are increasingly drawn
  to larger metro areas--D. Costa, MIT
• Metro areas dominate knowledge-industry clusters

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High Tech (ICT) Concentrated in Urban Areas
Seattle - Software
Portland - Semiconductors - SME/EDA - Display -
Computers
Minneapolis - Computers - Medical Devices
Boston - Computers
Salt Lake City - Software - Medical Devices -
Storage Technology
Sacramento - Computers
Silicon Valley everything!
Denver - Telecommunciations - Satellite - Storage
Research Triangle Park - Software
San Diego - Communications
Phoenix - Semiconductors
Atlanta - Database - Telecommunications
Austin - Semiconductors - Computers - SME
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Biotechnology Concentrating
Top 9 Centers Share
1980s 1990s Venture Capital
81 86 RD Alliances 89 96 New
Firms 61 77
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The Digital Divide is a Knowledge Divide
Percent of U.S. Households with a Computer
Central Educational
Attainment Rural Urban City Elementary
0-8 years 2.6 2.8 2.6 High School 1-3
years 6.5 6.1 4.7 High School 4
years 16.5 15.3 12.2 College 1-3
years 32.7 29.9 27.5 College 4 years or
more 51.2 50.7 47.0 Falling through the Net
http//www.ntia.doc.gov/ntiahome/tables.htm
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2. Rural Areas in a Knowledge-based Economy
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Globalization

• Non-metro areas were the low cost alternative to
  metro locations
• Pretty much like urban US, but cheaper
• Now the third world is the low cost alternative
• Competition is growing daily

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Some Rural Advantages are Fading

• Access to raw materials
• Declining transportation costs
• Firms produce close to markets NOT close to raw
  materials
• Changing Technology
• Low Cost Competitors are Global
• Now can source low cost anywhere
• Call centers in India or South Africa

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Some Rural Advantages Remain

• Proximity
• Access to Recreation
• Open space and outdoor recreation are
  increasingly scarce in urban areas
• Income elastic as income goes up demand for
  tourism goes up more
• Retirement/Lifestyle Opportunities

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Are rural places cheaper?

• Housing prices are less
• Food medical care are about the same
• But somethings are a lot more
• Travel, ball games, opera,
• Thai restuarants, antique shops, Powells
• Art movies, jazz venues

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Technologys Two-Edged Sword

• Rural businesses can reach more consumers
• LL Bean and Lands End can be in rural towns and
  sell everywhere
• Guyanese women selling handmade baskets over the
  web
• Rural retailers face more competition
• Used to worry about Wal-Mart
• Now everyone faces competition from
  web-merchants
• apparel, bookstores, travel agents, etc.

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Which Strategy to Choose?

• Things look cheaper here
• vs.
• Things look different here

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Product Differentiation

• Consumers Pay More for Quality Products
  Tailored to their Needs
• Clothes
• Magazines
• Cars
• Microbrews

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What Differences Can You Build On?

• Think of the Local Economy as an Ecological Niche
• What are its distinctive characteristics
• Behaviors of the local residents?

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3.

• Economic Challenges of The Dearth of Difference

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Next Exit Your Town?
Food Gas Lodging
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Some Local Cuisine
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Unique Shopping Opportunities
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Specialty Shops
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Home Brews
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Pacific NW is Outdoorsy

• Compared to the average for the US, we are
• Twice as likely to go camping
• 60 more likely to go hiking or backpacking
• 40 more likely to golf or hunt
• Region ranks last in theme park attendance
• Oregonians rank lowest in sedentary life styles
  and 2nd highest of vigorous physical activity

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Recreationally-Minded

• In the late 60s the jogging craze takes off in
  many towns led by Eugene Oregon
• In 1969 a guy starts selling japanese running
  shoes out of the back of his station wagon

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Columbia Gorge
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The Gorge Windsurfing Cluster
1980s Hood River, Oregon Seasonal High Winds in
the Columbia River Gorge Attract Windsurfers
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Drinking to your health

• Oregonians spend 17 more on alcoholic beverages
  than other Americans
• 16 more likely to be avid wine-drinkers
• Portland is largest of 11 markets rated above
  average in herbal tea and ground coffee
  consumption

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Drinking to your health

• Historically, Northwesterners drank more tea and
  bought more whole bean coffee than other
  Americans
• In 1971, a small coffee shop starts in Seattles
  funky Pike Place Market

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Oregons Rural Microbreweries
5th
1st
6th
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Differentiation International Evidence

• Kilkenny-Daniel analysis of US-Europe Food Trade
• US exports commodities
• Europe exports products
• Europe dominated by Appellations
• 246 varieties of Cheese in France
• Preference for qualitative variety can support a
  high-value added product industry with numerous
  small scale firms and high market prices

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Lessons

• Local Knowledge Dominates Opportunites for
  Prosperity
• Rural Advantages are changing
• Look to Build Clusters
• Your distinctive niche plus entrepreneurship are
  the key to the future economy