Department of Economics �

ECN 105 Elements of rural economics

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SLIDE 1

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Meaning of rural economics

• The term rural economics is the scientific study of how rural economies use scarce resources to satisfy their unlimited needs or wants.
• Rural economics is concerned with the efficient utilization of scarce resources by economic agents in the rural environment. These economic agents are individuals, firms and government.
• Rural economics is the branch of economics concerned with rural life and activities especially agriculture.

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What is an economy /rural economy

• An economy is the set of production, distribution and consumption activities which determine how resources ought to be allocated in a system.
• A rural economy is characterized by the primary sector and allied (joined) set of activities .
• The primary sector makes direct use of natural resources in an economy. This includes agriculture, forestry and fishing, mining, and extraction of oil and gas
• A rural economy is basically referred to as the producers economy.

Characteristics of rural economy

• A set of villages. There exist a lot of villages across the globe.
• Relatively isolated and sparsely populated
• Agriculture is the major occupation.
• Underdeveloped agriculture
• Problem of drought /Absence of irrigation facilities
• Rural cottage industries
• Poverty
• Illiterate citizens
• Barter system

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Why study rural economics

• To understand and analyze the socioeconomic dynamics of rural Ghana as well as rural areas of other countries.
• To know the basic concepts of rural development .eg poverty , inequality etc
• It offers us an opportunity to appreciate the challenges of rural economies
• We are able to know and tap the available opportunities in rural economies for economic growth and development .
• To eliminate rural poverty

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Scope of rural economics

• Rural economics covers all facets of the rural economy . That is the socio-economic, political ,cultural, environmental as well as science and technology of rural life. Some specific areas covered includes:

a.Farm and non-farm industry

• Farm industry refers to the science ,art, and business of cultivating soil, producing crops, and raising livestock.

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Scope of rural economics cont.

• Non-farm industry

This is termed as Rural Non-Farm Sector (RNFS) which include all economic activities such as household and non-household manufacturing,handicrafts,processing, repairs, construction , mining, and quarrying, transport , trade ,communication, community and personal services etc in rural areas.

Scope of rural economics cont.

b. Economic growth, development and change

• Economic growth is an increase in the aggregate production of goods and services (GDP or GNP) over a given period of time.
• Economic growth is usually calculated yearly either in nominal or real terms.
• Real GDP is nominal GDP after adjusting for inflation
• GDP (Gross domestic product) is the total monetary or market value of all finished goods and services produced within a country's borders in a specific period of time.
• GNP (Gross national product) is the monetary value of all goods and services produced by nationals or citizens both domestically and internationally minus income earned by foreign residents in a country.

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Scope of rural economics cont.

• Changes in economic growth is measured by economic growth rate
• Economic growth rate is the percentage change in the value of all goods and services produced in an economy over a specific period .
• Development or Economic development occurs when the GDP of a nation reflects in enhancing the quality of life of the citizens.
• Development in terms of better quality of life of the people; quality health ,quality education etc

Scope of rural economics cont.

c. Land use in rural economy

• This is concerned with land management and how the natural world is adapted to human needs.
• Land is used commonly for agriculture in rural areas.
• Rural land is also used for residential ,transport, commercial , institutional and industrial purposes.
• In some rural areas the unused land(open space ) are abundant.

Scope of rural economics cont.

d. Migration and depopulation

• Rural migration refers to the movement of people from one rural area to another or from rural to an urban area.
• Rural migration may be due to unemployment, food insecurity, poverty, or vulnerability to climate change.
• Rural depopulation is the decrease in the population of a rural area resulting from rural migration.
• Rural depopulation directly leads to a decrease in agricultural output.
• Rural depopulation consequently result in a reduction in allied economic activities like commerce, transportation industrial and other establishments.
• Rural depopulation leads to a decrease in standard of living of the populace in rural areas.

Scope of rural economics cont.

e. Rural finance is the provision of financial services and products to rural people.

• Rural finance is often channeled to agriculture sector as the main occupation in rural areas.
• Mortgage assistance to land development and farming equipment are significant to the growth of rural economies.
• In Ghana, rural finance is achieved through state owned banks and non-governmental organizations.eg rural banks

Scope of rural economics cont.

f. Government policy on rural economies

• A policy is a set of ideas or plans that is used as a basis for making decisions especially in politics , economics or business.
• In Ghana policies for rural areas are implemented through the local government and district assemblies.
• The local government and district assemblies are directly responsible for mobilizing local resources for the socio-economic development of the rural economies.

Scope of rural economics cont.

g. Rural housing :

• The provision of rural housing is considered inadequate in most parts of the world. In America . U.K , India and Africa , rural housing is inadequately supplied to the people.
• In the U S .A . and India rural housing is funded by programs of Government.
• From the 2021 population and housing census: Ghana's housing deficit is in excess of 1.7m.
• This is partly due to the in adequate financial support from Government of Ghana.

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Scope of rural economics cont.

g.General equilibrium and welfare analysis

• In economics , general equilibrium theory explains the behavior of demand , supply and prices in a whole economy.
• The assumption is that there are many interacting markets in every economy.
• These markets includes the goods market, financial market, labor market etc.
• The general equilibrium theory postulate that the interaction of demand and supply in all markets results in an overall general equilibrium.
• A welfare analysis reveals a devastating rural-urban income disparities especially among developing countries.
• There is a widening inequality gap between rural and urban economies.

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