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Chapter 14: The Welfare Effect of Economic Diversity in Rural Regions: An Analysis of Dutch Municipalities
14 The welfare effect of economic diversity in rural regions: an analysis of Dutch municipalities Sierdjan Koster, Aleid E. Brouwer and Eveline S. van Leeuwen It is usually assumed that the presence of multiple economic sectors in a given region reduces employment fluctuations in that region and therefore increases economic stability. This assumption has been tested frequently at the urban level, taking into account agglomeration forces that cause either specialization or diversity in economic activities. The diversity of economic activities and the effect on economic development in a rural setting, however, has not been a research focus in this context. Nonetheless, in the discussion on the development of rural areas in times of population decline, this question is very relevant. This chapter investigates to what extent economic diversity is associated with income levels in rural municipalities in the Netherlands. The findings show in an explorative cross-sectional setting that a diverse rural economy is associated with higher levels of income. INTRODUCTION Recent policy measures have been geared towards rural development justification and analyses of the impact of diversification in rural areas. Both in the EU and in many national rural policies a strong emphasis is placed on increasing the multi-functionality of rural areas. This includes the recognition of the multi-functionality of agriculture and a multi-sectoral and integrated approach to the rural economy. Changes in the composition of the economic system are one of the most important variables for economic growth and development (Saviotti and Pyka, 2004). It is, therefore, important to...
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