Chicago Fed Insights

Recap of the 2022 Rural Economic Development Conference: Part 1—Defining Rural Areas and Understanding Their Capacity Constraints

May 25, 2023

This is the first of two blog posts summarizing Creating Conversations on the Challenges and Opportunities Facing Rural Economic Development—a conference cohosted by the Federal Reserve Bank of Chicago and the W. E. Upjohn Institute for Employment Research on September 28–29, 2022, in western Michigan.

The conference featured two major segments. The first segment was a field trip to Montcalm Community College (MCC) in Greenville, Michigan—located over 30 miles away from the conference base in Grand Rapids. At the college, panels of MCC leaders and community leaders from Montcalm County spoke about their local rural development challenges. The second segment, which was held at the primary event site in Grand Rapids, featured several panels of researchers and practitioners who discussed a host of issues related to rural economic development—including how to define rural areas and how to raise the quality of life in these places, for instance, by improving their access to broadband internet and health care.

The conference was structured to include practitioner responses to each research paper presented. This gave the audience—and the researchers themselves—plenty of opportunities to place the research within the context of policy decisions and to consider the practical applicability of the research results. This approach also provided a way for practitioners from different regions to learn about different approaches to addressing similar rural development issues facing them locally. This format yielded robust discussions, which provided momentum to continue related policy work and research. Both this blog post and the follow-up post identify overarching themes from the event and summarize the researchers’ and practitioners’ findings. Videos of each of the conference panels are available online.

This first post focuses on why it is difficult but vital for policymakers and researchers to define the term rural. One of the key issues facing policymakers and researchers when working with rural communities is how best to define rural, which involves demarcating rural, suburban, and urban areas. This question has important policy implications, such as how best to provide federal and state government funding to rural localities and how to improve intergovernmental cooperation to deliver stronger results to rural communities. Researchers and practitioners explained how changing the definition of rural can alter the policy implications. This post also goes over panel discussions on a rural area’s capacity to meet its residents’ needs—i.e., the maximum level of services that a local rural government or nonprofit can directly (or indirectly) deliver based on the number (and skill sets) of people, financial assets, and other resources available. Conference panelists explored the capacity issues facing many rural local governments and nonprofits, particularly in the wake of the Covid-19 pandemic.

Defining rural

Kicking off the research presentation panels were Nathan Anderson (assistant vice president, Federal Reserve Bank of Chicago) and Mark Partridge (professor, Ohio State University). Anderson and Partridge each presented their individual research on the ways that rural areas are defined according to different governmental standards—and how those official measurements can alter the population count, which is vital when it comes to the amount of grants and other benefits that a rural locality can qualify for.

Anderson’s research found that the total population of rural and small-town counties within the entirety of the five states of the Federal Reserve System’s Seventh District (Illinois, Indiana, Iowa, Michigan, and Wisconsin) fell by 23% between 1980 and 2020, using official data and definitions from the U.S. Census Bureau and the U.S. Department of Agriculture’s Economic Research Service (USDA ERS). A significant portion of this drop stems from some critical changes in classification: Some rural places gained enough population between 1980 and 2020 to become classified as nonrural or metropolitan areas. Because of these shifts, many areas were lost from the official calculation of the rural population. Anderson calculated that places in Seventh District states that were classified as rural in both 1980 and 2020 actually gained in population by 1%. So, even though some places have officially transitioned from rural regions to more suburban or micropolitan ones, the population in areas under Anderson’s definition of rural (which is broader and may be more in line with how many of these areas consider themselves) has still grown somewhat over those four decades.

Partridge explained his own understanding about how the official definitions of rural and urban have changed as the country’s population has changed. He said that rural places do not suddenly switch to being urban ones, but instead, they usually go through stages—i.e., the suburban or micropolitan classifications—before becoming officially urban. As the shifts in populations occur within and between regions across the United States over time, people in rural places are connecting more and more to nearby urban areas. Partridge shared that rural areas largely benefit from connecting to urban areas for things like services, jobs, and industry clustering (which has positive effects such as improved efficiencies). The population required to keep some services, amenities, and stores viable has changed during the past few decades; for instance, across the United States, the retail landscape has been transformed from small, mom-and-pop stores to big-box ones, he pointed out. Partridge noted that a big-box store cannot operate unless it has an ever-rising base of customers, so generally it cannot exist in an isolated rural place. This implies that rural areas that do not connect to nearby suburban and urban areas for amenities like big-box retailers can shrink as businesses and people move to places with a larger customer base or more amenities.

In their separate presentations, both Anderson and Partridge emphasized that although many rural areas can and do have similar economic and demographic issues, rural areas are not as homogenous as they might seem on the surface. Anderson also pointed out that only 13% of the five Seventh District states’ population live in rural or small-town counties; given that this relatively small share of the population is spread out across these geographically vast states, it can be challenging to provide services to some rural residents, especially those who live in places that are physically remote from urban centers or from other rural communities.

Understanding rural areas’ capacity constraints

A major challenge for rural economic development is increasing a rural area’s capacity. Rural areas are, by nature, less populated than urban areas and can have fewer resources and fewer people with the required skills to help create and implement public programs. The lack of such capacity extends to local governments—indeed, village managers or township leaders must often try to provide for their rural constituents using fairly small government budgets. Rural government budgets can be strained when leaders must sometimes pay for additional services that can’t be provided locally—such as for clean water and sewer-system connectivity to the nearest city. According to a May 2022 St. Louis Fed blog post, rural governments can be understaffed and underfunded, leading to a need for community-based nonprofits and development organizations to make up the difference. A January 2022 report from Headwaters Economics acknowledges that often “communities simply lack the staff—and the tax base to support staff—needed to apply for federal programs.” In sessions held at Montcalm Community College, many speakers discussed such capacity constraints in their local communities.

At MCC, local government and nonprofit leaders spoke about the importance of boosting capacity, funding, and support for rural areas. Darin Dood and Mike Falcon (village managers for Lakeview and Howard City, Michigan, respectively) described the ways in which their rural towns do not have enough capacity for pressing work. Along with his village manager duties, Dood acts as airport manager and police chief for Lakeview and sits on the board of the Montcalm Economic Alliance. Similarly, Falcon is a member of Howard City’s Downtown Development Authority. While large cities have dedicated grant writers on payroll, small rural towns generally do not: In fact, village managers and small-town government staff often submit grants and seek funding in their spare hours. Both Dood and Falcon described situations where a county or state government agency suggested solutions that are infeasible for small towns and rural areas, such as hiring a city engineer or grant writer. Both Dood and Falcon shared that they need more capacity (i.e., more staff) to focus on procuring further funding through federal and state government grant programs and other avenues.

One of the reasons rural areas have issues with capacity and funding is the differing official definitions of rural—which can pose multiple obstacles to rural governments. The United States Office of Management and Budget (OMB) and the U.S. Census Bureau use different definitions for the term rural, and the USDA ERS uses yet another definition. All three definitions are based on the number of people in counties or outside of urban areas. As explained in research by Christelle Khalaf (associate director of the Government Finance Research Center, University of Illinois at Chicago) and her co-authors,1 generalized and inconsistent definitions of rural (determined by agencies at the federal level) make it difficult to implement useful policy at the local level. In her research paper presentation, Khalaf contended that economic development strategies devised by taking local characteristics into account are often a better fit for rural communities than more general federal definitions, ultimately yielding better economic outcomes for them. Khalaf presented her research on a new machine-learning method that accounts for more nuances in the definition of rural, which may prove to be more useful for policymaking. While Khalaf did not provide a concrete new definition for rural, she did explain that the new method incorporated more-granular information and different community characteristics that factor into the definition (instead of relying solely or chiefly on population thresholds). Results based on machine-learning methods are often more complicated to interpret on a large scale because of the number of variables they include; however, as Khalaf argued, the level of detail provided to the model described in her paper might prove to be more helpful to policymakers who want to develop successful rural development programs that are more precisely tailored to their local communities.

Marcello Graziano (associate professor, Southern Connecticut State University) presented research on an algorithm that redefines rural places by demographic, economic, land cover, and transportation characteristics.2 He identified how the rural (or urban) characteristics of places affected their recoveries from the Great Financial Crisis and the Great Recession, and concluded that during the recovery, rural areas had lower increases in income and workforce—but also lower increases in poverty rates—relative to urban areas. To close his presentation, Graziano concluded that local economies that were not overly reliant on physically distant economies more robustly recovered.

As the panel discussions revealed, both Khalaf’s and Graziano’s more nuanced definitions for rural can help in two main ways: They can identify similar characteristics across rural areas outside of their low population counts, and they can be fine-tuned to identify specific places based on their particular economic and financial circumstances. If adopted, these and similar methods of identifying rural areas could help more local governments qualify for federal and state grants and other benefits.

In their response to the research presentations, Sam Moore (executive director, Lapeer Development Corporation in Michigan) and Taylor Stuckert (executive director, Clinton County Regional Planning Commission in Ohio) confirmed that official definitions of rural—as well as certain regional categorizations—often did not prove useful to practitioners; and in many cases, they were actually counterproductive. As a practitioner of rural economic development in Michigan, Moore stated that different official definitions of rural can sometimes add more obstacles for a rural community seeking resources. Moore confirmed that too much time can be spent during the grant-writing process to ensure that a community fits into various federal definitions of rural in order to obtain the needed funding. According to Moore, any changes to the definition of rural should better serve rural communities and provide a clearer framework for funding and support. Stuckert shared his own experience of working in development in Ohio. Clinton County is part of the Dayton Development Coalition, though Clinton County now has more economic ties to the Cincinnati metro area (after this area’s population grew in size). He indicated that Clinton County’s inclusion in the Dayton coalition is an example of when politically defined boundaries (which can seem arbitrary from an economic development standpoint) determine a region’s interaction with nearby metro areas and the programs they have access to. In Stuckert’s view, Clinton County’s involvement with the Dayton coalition does not always make sense for development programs because Clinton County is more economically integrated with Cincinnati. Stuckert mentioned that a framework on community typology would be helpful in identifying peer communities with similar challenges, which could lead them to collaborate and share economic development strategies.

Throughout the conference, other practitioners discussed the challenges of finding adequate funding for rural areas, plus their experiences working with governments and grant programs to accomplish economic development goals. One such practitioner was Liesl Seabert (rural community revitalization program manager, Iowa Economic Development Authority), who spoke about how her organization provides support and direction to different rural and small-town governments—mostly to guide them to funding. Seabert said the State of Iowa has grant programs to support rural revitalization projects, including one that helps provide access to broadband internet in rural areas; but some local governments need guidance on available programs and ways to “stack” programs’ benefits to ensure their economic development goals are met. Seabert said she acts as the coordinator for local governments in Iowa to help them learn about and access these programs. Because so many grant and funding opportunities are aimed at metropolitan areas, she noted local rural governments have needed more guidance to access the right programs that can help their economic development initiatives.


Establishing the definition of rural is important to farming and rural manufacturing communities and the surrounding areas because this can affect their access to federal and state funding and other resources. Researchers described the difficulties with nailing down a definition of rural, especially as the number and geographies of rural places appear to be shrinking over time. The organization of rural governments and their relationship to larger urban areas do shape how practitioners like Moore and Seabert think about developing and funding their economic development programs. The follow-up blog post will go into greater detail about how both researchers and practitioners approach and assess economic development initiatives and how their work helps rural communities gain more access to key services, such as medical care.


1 Christelle Khalaf, Gilbert Michaud, and G. Jason Jolley, 2022, “Toward a new rural typology: Mapping resources, opportunities, and challenges,” Economic Development Quarterly, Vol. 36, No. 3, August, pp. 276–293. Crossref

2 Benjamin W. Heumann, Marcello Graziano, and Maurizio Fiaschetti, 2022, “A data-driven algorithm to redefine the U.S. rural landscape: Affinity propagation as a mixed-data/mixed-method tool,” Economic Development Quarterly, Vol. 36, No. 3, August, pp. 294–316. Crossref

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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