Rural-urban policy effects on the regional economies of South Ostrobothnia and North Karelia

Research output: ThesisDoctoral ThesisMonograph


The thesis studies rural and regional policy effects on the rural economies of South Ostrobothnia and North Karelia. In addition, it investigates whether the applied policies accelerate economic agglomeration towards the urban centres of these regions.
The analysis is based on the economic linkages among the economic agents and among the rural and urban areas. Rural-urban social accounting matrices (SAM) were built on the regions and used as base year data for the multiplier and computable general equilibrium (CGE) models, by which the sets of policy simulation were carried out. The specifications of the shocks aim at reflecting the choices of the rural policy makers as the policies and sectors having an ability of enhancing rural development. Thus the simulations consist of agricultural policy changes (e.g. CAP pillar II modulation), transport-infrastructure policies (investments and R&D policies) and increases in tourism demand (e.g. through intensified marketing efforts).
The results indicate that the magnitude, and in some cases, the directions of the effects were area specific. South Ostrobothnia, for which the food cluster is important, responded relatively more strongly to the agricultural policies. The infrastructure and tourism policies also increased Regional Gross Domestic Product and employment. In addition, regional exports proved to have an important role for the region. On the other hand, the transfer of agricultural subsidy to the farm diversification did not increase RGDP since the traditional agriculture, due to its linkages, utilised the subsidies more effectively.
In contrast, North Karelia was more responsive towards the infrastructure and tourism policies. The strengthening of the local services would effectively promote economic development in North Karelia. The results suggest that the increased efficiency of the transportation sector could slow down agglomeration in a highly remote area. Moreover, the subsidy transfer to the farm diversification resulted in increases in RGDP and employment. Yet, regarding both the regions and most of the policy shocks, the positive effects tend to accumulate in the urban areas.
In conclusion, provided that the goal is to strengthen overall regional development, the acceptance of the urban centres as the engines of development would be preferable, since they are able to spill over benefits also to the rural surroundings. As a consequence, however, the economic activity and population further concentrate in the urban areas. In contrast, in order to support the genuinely rural areas, more targeted measures are called for. Since the effects were area-specific, the findings highlight the role of the local actors and thus emphasise the importance of sensitivity towards the diversity of local circumstances.
Original languageEnglish
Place of PublicationHelsinki
Print ISBNs978-952-10-7959-7
Electronic ISBNs979-952-10-7960-3
Publication statusPublished - 2012
MoE publication typeG4 Doctoral dissertation (monograph)

Fields of Science

  • 415 Other agricultural sciences
  • rural policies, regional policies, agglomeration, Computable General Equilibrium, Social Accounting Matrix

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