New Thünen Report on structural weaknesses in rural areas in the context of the Common Agricultural Policy

The new Thünen Report “On the structural weakness of rural areas in the context of the demarcation of GRW support areas” by Dominik Frankenberg, Alexander Kopka and Cornelius Peters aims to help political decision-makers evaluate possible changes to the demarcation of support areas against the backdrop of different political goals. The focus is on the structural weakness of rural areas, which are often considered to have less potential for adaptation than urban regions. This is indicated, for example, by lower commercial investment in rural areas.

Four key conclusions of the report are:
Firstly, depending on the focus of funding policy, very different regions can be classified as structurally weak. Currently, rural areas, measured in terms of population distribution, are classified as structurally weak slightly more often than more densely populated regions.

Secondly, with the aim of strengthening the “preventive character” of its funding, the GRW could provide more targeted support for coping with transformation processes if the adaptability of businesses is impaired by regional location conditions. It should be noted that regional transformation pressures vary depending on the dimension under consideration. The pressure to transform in the areas of digitalization and demographics is often higher in rural areas than in urban regions. In terms of climate neutrality, urban areas tend to face greater pressure to adapt.

Thirdly, the GRW could focus more strongly than before on the productivity of jobs in structurally weak regions. Productivity growth is stagnating nationwide. Higher labor productivity can, among other things, help to leverage regional value creation potential in regions experiencing a demographic decline in the labor supply or stabilize value creation. It should be noted that nominal wages tend to be lower in rural areas than in urban areas for the same level of regional labor productivity.

Fourthly, the authors conclude in their analysis that the high weighting given to the underemployment rate to date could be questioned. Currently, the underemployment rate is included in the GRWs overall indicator for measuring structural weakness with five times the weighting of the infrastructure indicator. In the medium and long term, however, underemployment has fallen across the board and skilled labor shortages have increased. In addition, there is a pronounced skills mismatch in the labor market: in regions with high underemployment in particular, unemployed people are particularly likely to seek work as unskilled laborers. Companies, on the other hand, are primarily looking for skilled workers, specialists, and experts. Such mismatch problems are more likely to be addressed by labor market measures than by regional policy measures.

All results can be found in the new Thünen Report (https://www.thuenen.de/media/publikationen/thuenen-report/Thuenen_Report_124.pdf).

Contact: Dr. Jan Cornelius Peters