New article on recent economic developments and current challenges in rural areas

For the current issue of the journal Ländliche Räume, Jan Cornelius Peters and Christian Hundt have contributed the introductory article for the section ‘Rural Areas as Strong Economic Locations,’ entitled ‘On the Economy in Rural Areas: Structures, Recent Developments, and Current Challenges.’ The article is available here (in German).

Current transformation processes associated with ongoing digitalization, decarbonization, and demographic change pose structural challenges to rural and urban regions to varying degrees. In their article, Peters and Hundt show that in rural areas the majority of employees work in service sectors. Compared to urban areas, however, manufacturing still plays a relatively important role in rural economies. As a result, the economies of rural areas face particular challenges, not least due to the transformation of industry. Since 2019, employment losses have been observed in particular in non-knowledge-intensive industries.

By contrast, employment gains have occurred mainly in the non-industrial economy and in knowledge-intensive services. As a result, employment losses in the industrial sector in rural areas have so far been offset by growth in the service sector, albeit to a lesser extent than in urban areas, where industrial job losses between 2019 and 2023 were stronger compensated. This confirms that the structural shift away from industry affects rural areas to a particularly strong degree.

From a geographical perspective, regions in southwestern Germany have developed less favorably in terms of value added since 2019 than many regions in northern and eastern Germany. Employment dynamics, by contrast, have recently been uniformly negative across the eastern federal states (with the exception of parts of Brandenburg) and in Saarland. These analyses of regional changes in employment and gross value added also indicate that the economic development of (rural) regions varies considerably, and that focusing on only one indicator can sometimes convey an overly pessimistic or overly optimistic picture.

As starting points to tackle of upcoming challenges—digitalization, decarbonization, and demographic change—the authors discuss how the automation of production processes and the use of artificial intelligence can help to operate in a more labor-saving manner, increase the productivity of jobs and workers, and thus stabilize value creation even in regions with a declining labor supply. This requires, among other things, investments in new technologies and new fields of business. At least as important is the qualification and upskilling of the workforce to meet the changing demands resulting from digitalization and/or decarbonization.

Contact: Jan Cornelius Peters