Measuring the determinants of relative economic performance of rural areas

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.