Rural America is not key to the economy.

Economic growth in the United States has slowed in recent decades, but the negative effects have been especially severe in rural America. Although some rural communities continue to prosper, much of rural America has faced stagnant economic conditions. One possible cause of declining economic growth is declining economic “dynamism” manifested through long-running trends such as fewer firm startups and deaths, declining entrepreneurship and innovation that leads to lower productivity growth, sclerotic labor markets, and less product market competition.

When examining key indicators of dynamism, rural America appears to have faced even greater drops dating back to the late 1970s. These include greater relative declines in migration rates, especially rural-to-urban migration that has long been a key source of upward mobility. Rural areas have also seen larger declines in new-firm creation than their urban counterparts, and there has been a greater relative shift away from small to large firms and a relative reduction in the importance of self-employment. The concern is that both small and new firms are disproportionally responsible for net job growth, and localities with greater shares of small firms and self-employment tend to subsequently grow faster in the long run.

When examining rural America as a whole, the eastern US experienced greater relative drops in measures of dynamism, especially in a wide swath of the northeastern region that trended toward President Donald Trump in 2016. These reductions appear to be associated with relatively worse rural economic performance, especially in the East.