United States 

Department of 

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Economic

Research

Service

John Pender, Alexander Marré, and Richard Reeder

Rural Wealth Creation

Concepts, Strategies, and Measures

Economic 

Research 

Report 

Number 131

March 2012
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Pender, John, Alexander Marré, and Richard Reeder. Rural Wealth 

Creation: Concepts, Strategies and Measures. ERR-131, U.S. Department 

of Agriculture, Economic Research Service. March 2012.
United States

Department

of Agriculture

www.ers.usda.gov

A Report from the Economic Research Service

Abstract

This report presents a conceptual framework for rural wealth creation, drawing upon the 

U.S. and international development literature. The framework emphasizes the importance 

of multiple types of assets (physical, fi nancial, human, intellectual, natural, social, political, 

and cultural capital) and the economic, institutional, and policy context in which rural 

wealth strategies are devised. The report discusses the role of wealth creation in the rural 

development process, how wealth can be created in rural communities, and how its accumulation and effects can be measured.

Keywords: wealth creation, rural development, regional development, community economic 

development, sustainable development, livelihoods, wealth indicators, conceptual framework

Acknowledgments

The authors are grateful to Cornelia Flora, Distinguished Professor, Department of 

Sociology, Iowa State University; David Sears, Chief of Staff, Offi ce of Community and 

Economic Development, USDA Rural Development; Sarah Low, Economist, Resource and 

Rural Economics Division, USDA Economic Research Service; and an anonymous reviewer 

for their thoughtful and detailed reviews that helped to improve the manuscript. We are 

also grateful to members of the senior management of the Economic Research Service who 

reviewed the manuscript and provided valuable comments; to Doug O’Brien and other staff 

of USDA Rural Development and the National Academy of Sciences Geographic Sciences 

Committee, who participated in briefi ngs on this research and provided useful feedback; 

to participants in presentations by the authors on this research at the Economic Research 

Service and at 2010 meetings of the Agricultural and Applied Economics Association and 

the North American Regional Science Council; and to Dale Simms, who edited the manuscript, and to Curtia Taylor, who designed the layout.

John Pender, jpender@ers.usda.gov

Alexander Marré, amarre@ers.usda.gov

Richard Reeder, rreeder@ers.usda.gov

Rural Wealth Creation

Concepts, Strategies, and Measures Economic 

Research 

Report

Number 131

March 2012
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Contents

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

What Is “Wealth”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Why Is Wealth Creation Important for Rural 

Economic Development? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

How Can Wealth Be Created in Rural Communities?. . . . . . . . . . . . . . . 8

 Conceptual Framework for Wealth Creation . . . . . . . . . . . . . . . . . . . . . . 8

 Economic Development Strategies and Rural Wealth Creation . . . . . . . 17

 Local Development Strategy Formulation . . . . . . . . . . . . . . . . . . . . . . . 21

 Wealth Creation Approaches To Combat Poverty. . . . . . . . . . . . . . . . . . 23

Why Measure Wealth Indicators? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

 General Purposes of Indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

 Specifi c Reasons To Measure Wealth Indicators . . . . . . . . . . . . . . . . . . 28

 Reasons Not To Measure Wealth Indicators . . . . . . . . . . . . . . . . . . . . . . 28

How Can Rural Wealth Creation Be Measured? . . . . . . . . . . . . . . . . . . 30

 Identifi cation, Diagnosis, and Targeting . . . . . . . . . . . . . . . . . . . . . . . . . 31

 Improving Design and Monitoring Interventions . . . . . . . . . . . . . . . . . . 36

 Assessing Impacts of Interventions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Appendix A: Characteristics of wealth types . . . . . . . . . . . . . . . . . . . . . 62

 Endogeneity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

 Tangibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

 Marketability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 

 Measurability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

 Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

 Divisibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

 Rivalry and excludability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

 Externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

 Non-income benefi ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Appendix B: Conceptual frameworks for wealth 

creation and rural livelihoods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

 Community and rural development literature in the 

 United States and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

 International agricultural and rural development literature . . . . . . . . . . 69

 Synthesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Appendix C: Available data on selected wealth indicators . . . . . . . . . . 73
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Summary

What Is the Issue?

Rural development researchers and practitioners have argued in recent 

years that investing in a broad range of assets is a critical component of 

long-term economic growth in rural communities. Wealth can contribute to 

people’s welfare in many ways beyond increasing income, such as providing 

economic resilience in adverse circumstances or enhancing one’s power and 

prestige. Given the importance of wealth for economic well-being, understanding how wealth is distributed is critical. The marketable wealth of 

households in the United States is more unequally distributed than income. 

Understanding the distribution of wealth across and within rural communities is also critical. Despite its importance, efforts to conceptualize and 

measure rural wealth creation have been limited. 

What Did the Study Find? 

Although many Federal and State programs are concerned with wealth 

creation, this report’s focus is on local and regional approaches suited to the 

diverse situations facing rural communities. Traditional strategies—such as 

those based on exploiting natural resources, recruiting footloose industries, 

developing as regional centers or as bedroom communities, or amenitybased development—are suitable in particular contexts. Less traditional 

strategies— such as promoting entrepreneurship and innovation, industry 

clusters, and attracting the creative class—are aimed at attaining a comparative advantage in today’s knowledge-based economy. 

No wealth creation strategy will work in all contexts; therefore, rural regions 

and communities would benefi t from having the capacity to identify strategies that are best suited to their own wealth endowments and local priorities. 

Approaches to strategy formulation and implementation include community 

strategic planning and research-based targeted industrial development. 

This report presents a conceptual framework for wealth creation, drawing 

upon the U.S. and international rural development literature. The framework 

emphasizes multiple types of assets (physical, fi nancial, human, intellectual, 

natural, social, political, and cultural capital) and the economic, institutional, and policy context in which rural wealth strategies are devised. For 

example, manufacturers in high-poverty outmigration rural counties often 

cite the poor quality of local schools as one of the most critical constraints 

that they face in recruiting and retaining managers and other professionals. 

Hence, investments in improving the quality of local schools and their staff 

(physical and human capital) may be a prerequisite for a strategy focusing on 

attracting manufacturing fi rms. 

Rural wealth creation is highly context-dependent. For example, policies to promote biofuel production have created wealth in communities with 

fertile farmland, adequate water supplies and transportation infrastructure, 

and an entrepreneurial class of farmers or other investors capable of organizing and managing such investments. Where these factors are absent, 
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efforts to promote biofuel production may be unsound and could deplete 

local wealth. 

Different types of capital are often complementary. Investing in one type 

of capital can increase the returns to investing in another. As such, planning 

and coordinating across a range of investments is more likely to result in 

long-term success of rural development efforts. 

Investments always involve economic risks, and diversifying the portfolio of investments may help to reduce such risks. Broader diversifi cation of the local economy into activities that are not highly dependent on 

the same market trends, resource base, and government policies may more 

effectively address risks associated with changes in any of these economic 

drivers. 

Local ownership can contribute to increased local returns from investments, but involves risks. Locally owned businesses are often thought to 

provide greater local economic benefi ts than absentee-owned businesses 

due to dividends earned by local owners and a tendency for locally owned 

businesses to hire from the local labor force. However, the increased returns 

associated with local ownership may be associated with greater risks than 

diversifi ed investing in non-locally based assets. 

It is important to consider the multiple types of outcomes that can result 

from any investment, such as environmental and social impacts. For 

example, increased local tax collections resulting from new business development may enable public investments in local roads, schools, or other infrastructure, which can spur future wealth creation. On the other hand, negative 

environmental impacts such as depletion of local groundwater supplies may 

impair a community’s ability to attract or retain residents. 

Strategies to promote rural wealth creation face numerous challenges, as 

well as offering the potential to contribute to sustainable and broadly shared 

rural prosperity. The report discusses several traditional (industrial recruitment, regional centers, bedroom communities, amenity-based development) 

and non-traditional (small business growth and entrepreneurship, clusterbased development, rural innovation and knowledge-based development, and 

attracting the creative class) strategies, how they can contribute to wealth 

creation, and the contexts where they may be well suited. 

The report also discusses why and how wealth indicators can be measured. 

To diagnose problems and identify and target interventions, we consider 

approaches to measuring comprehensive wealth using an aggregate monetary value. Considering the stringent assumptions and data requirements of 

this approach, we conclude that a more practical approach for measuring 

rural wealth is to measure a set of wealth indicators. We review the few prior 

efforts that exist to measure wealth indicators in rural areas of the United 

States, and then provide information on additional indicators of different 

wealth types and data sources that could be used for this purpose. 

To help improve the design and monitoring of interventions, various methods 

can be used to clarify the logic of the intervention and its hypothesized 

outcomes and impacts. We discuss the use of impact pathway evaluation 
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as one method for this, and illustrate how this approach could be applied 

to derive wealth and other indicators for a few example rural development interventions. To assess the impacts of interventions, we discuss how 

measuring wealth indicators could help in addressing attribution problems. 

Measuring wealth creation and its outcomes also creates many challenges, 

including the diffi culty of conceptualizing and measuring intangible and 

nonmarketed wealth, the cost of measuring a broad array of wealth indicators, diffi culties in evaluating outcomes along multiple dimensions, and challenges in how to scale up the knowledge gained from assessment efforts in 

different contexts.
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Introduction

Policymakers and rural development practitioners increasingly recognize 

that a short-term focus on creating jobs or increasing income is insuffi cient 

to generate sustainable rural development or achieve a long-term reduction in 

rural poverty. A focus on creating and maintaining wealth offers the potential 

to achieve more lasting rural prosperity.

Scholars have studied wealth creation at least since the time of Adam Smith’s 

Inquiry into the Nature and Causes of the Wealth of Nations (1776), and 

several Nobel prizes have been awarded to economists for their work on 

wealth. Ecologists, sociologists, and political scientists have assayed broader 

wealth concepts such as natural, social, and political capital. Many rural 

development researchers, foundations, think tanks, and advocacy groups 

argue that investing in a broad range of assets is critical for long-term 

economic growth and prosperity in rural communities (Kretzmann and 

McKnight, 1993; Castle, 1998; Green and Haines, 2002; Flora and Flora, 

2004; Ratner, 2010). Despite the importance of this topic to policymakers 

and practitioners, and the broad and deep foundation of knowledge about it, 

efforts to conceptualize and measure rural wealth creation have been quite 

limited. 

The report demonstrates why wealth creation is important for rural development, how it can be created in rural communities, and how its accumulation 

and effects can be measured. 
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What Is “Wealth”?

Some defi nitions of wealth emphasize the value of marketable assets, 

while others include all valued assets, regardless of their marketability. For 

example, Arrow et al. (2010) defi ned comprehensive wealth as “the social 

worth of an economy’s entire productive base,” which “consists of the entire 

range of factors that determine intergenerational well-being.” We also defi ne 

wealth comprehensively, as the stock of all assets, net of liabilities, that can 

contribute to the well-being of an individual or group. Unlike Arrow, et al., 

we do not use the term “social worth,” which suggests that all types of wealth 

can be measured using a single metric of social worth. We think it is useful to 

consider many different types of assets as wealth, even if they cannot all be 

aggregated into a single measure.

We focus on types of wealth that can be considered “capital.” In classical 

economics, capital referred to durable physical assets—such as machinery 

and buildings—that increase the value of production. Economists also traditionally refer to fi nancial assets as capital. Alfred Marshall, the founder 

of neoclassical economics, defi ned capital as “that part of wealth which is 

devoted to obtaining further wealth,”1 or wealth that has a productive return. 

The concept of capital has since expanded to include other assets besides 

physical goods and fi nancial assets. Economists have long accepted the 

concept of human capital—defi ned by Becker (1962) as resources embedded 

in people, such as their education, skills, and health—and have incorporated 

it into economic growth theory (Uzawa, 1965; Lucas, 1988; Romer, 1990; 

Barro and Sala-i-Martin, 1995). Accumulating knowledge or intellectual

capital has also been emphasized as essential to longrun economic growth 

(Romer, 1986, 1990).2 More recently, sociologists and political scientists have 

defi ned social capital as “features of social organization, such as networks, 

norms and trust that facilitate coordination and cooperation for mutual 

benefi t” (Putnam, 1993) and have argued that it is critical for achieving prosperity. Ecological economists have argued that investing in natural capital—

defi ned by Costanza and Daly (1992) as “a stock [of natural resources] 

that yields a fl ow of valuable goods and services into the future,” including 

renewable resources such as ecosystems and nonrenewable resources such as 

fossil fuel and mineral deposits—is essential for sustainable economic development. Others have argued that other types of capital are also important 

for community development, including cultural capital—people’s understanding of society and their role in it, and their values, symbols, and rituals; 

and political capital—“the ability of a group to infl uence the distribution of 

resources within a social unit” (Flora and Flora, 2004). 

All types of capital (1) are durable assets, (2) can be accumulated or depleted 

through investment and consumption decisions, and (3) can contribute to the 

value of production, or more generally, to well-being. Capital is therefore 

different from exogenous determinants of well-being, such as the amount 

of solar radiation, and from the fl ows of goods and services that result from 

capital, such as income. Not all capital is tangible or directly marketable, 

although the fl ows of services from capital may be marketable even if the 

capital itself is not (e.g., human capital). Measuring the value of nonmarketable capital can be diffi cult or impossible. Such unmeasured wealth has 

1Alfred Marshall. Great-Quotes.com, 

Gledhill Enterprises, 2011. 

http://www.great-quotes.com/

quote/1443341, accessed Thu Jun 2 

10:07:38 2011.

2Romer (1990) distinguished knowledge from human capital by arguing 

that knowledge, such as the design of a 

new good, is not tied to specifi c people 

and is therefore non-rival in nature (i.e., 

its use by one person does not reduce 

its availability for use by someone else). 

Human capital, by contrast, is imbedded 

in particular people and therefore rival 

in nature. This distinction is important because the non-rival nature of 

knowledge can lead to increasing 

returns to scale, which is a source of 

longrun growth in an economy (Ibid.). 

Investments in human capital can also 

contribute to longrun growth by offsetting the diminishing returns to investments in physical capital (Barro and 

Sala-i-Martin, 1995), causing spillovers 

of knowledge that result in increasing 

returns to scale (Lucas, 1988) or serving 

as an essential input in the production 

of knowledge (Romer, 1990).
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been labeled “intangible capital,” and efforts have been made to measure its 

value indirectly (World Bank, 2006; World Bank, 2011). Such assets can be 

considered capital even if their value cannot be readily measured in monetary 

terms.3

Wealth is analogous to the level of the water in a bathtub, while income 

is analogous to the fl ow of water into the tub (fi g. 1). Wealth can generate 

income, and income can contribute to increased wealth over time. If 

consumption (including direct consumption and wealth depreciation)—

analogous to outfl ows of water from the bathtub—exceeds income, then 

wealth will be drawn down over time. The difference between income and 

consumption represents net savings, which increases wealth over time if positive and depletes it if negative.4 

People may have high wealth and low income or low wealth and high 

income, as well as the more common positive association between the two. 

Considering only income or consumption as indicators of well-being without 

also considering wealth can be misguided and can misdirect policy. For 

example, many farmers in the United States are wealthier than the average 

person (in terms of the net value of their marketable physical and fi nancial 

assets), even if their incomes are at times lower than average (El Osta and 

Morehart, 2008). Ignoring farmers’ wealth can lead to poorly targeted policies to address rural poverty. Conversely, households that lack adequate net 

wealth, perhaps because of high debt loads, may face fi nancial hardship 

despite having high incomes. 

The expectation that wealth and income are positively correlated is because 

greater wealth often contributes to greater income. Indeed, people invest in 

many kinds of wealth in anticipation of returns or income, as when fi nancial 

assets appreciate in value or yield dividends. 

3We discuss important characteristics 

of different types of wealth—including 

tangibility, marketability, measurability 

and others—in appendix A.

4In a closed economy (i.e., without 

borrowing), savings equals investment. 

In an open economy, investment can 

be fi nanced by borrowing as well as 

saving. In this case, investment doesn’t 

necessarily represent an increase in net 

wealth, since the increase in assets may 

be offset by increased liabilities.

Source: Adapted from Hoffer and Levy (2010).

Figure 1

Simple bathtub model of wealth and income

Income

Wealth

Consumption
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Wealth can contribute to income, but it also provides the leverage to take 

advantage of new opportunities and an economic safety net. This is certainly 

true for “liquid” forms of wealth (i.e., assets that are easily marketable and 

convertible to cash) such as fi nancial assets, but can be true for nonmarketable forms as well. For example, social capital may enable access to critical 

resources in the face of adverse events or new opportunities, due to reciprocal 

obligations within a social network (Coleman, 1988). In another example, 

politically connected communities may be better able to access resources 

through Federal or State programs as a result of their political capital. 

Many types of wealth can generate nonmarket benefi ts. For example, human 

capital can confer consumption benefi ts, like a greater capacity to appreciate 

or infl uence their environment (Schultz, 1961), whereas natural capital can 

provide environmental amenities like scenic views or clean air and water 

(Costanza and Daly, 1992). Even fi nancial wealth may have many nonmonetary welfare benefi ts (Sherraden, 1991), such as heightened aspirations, social 

infl uence, or political sway.

The concepts of wealth and wealth creation apply to individuals, households, 

businesses, communities, regions, States, and nations. Accumulating net 

wealth requires net savings and investment across all scales, though the attention devoted to different types of assets will depend on the decisionmaker 

involved. For example, an individual is alert to his or her own private physical, fi nancial, and human capital assets, while local government leaders may 

be most directly concerned about investments in local public infrastructure 

and facilities. 

Wealth creation concepts apply in all contexts, although rural wealth 

creation involves opportunities and constraints that are distinct from wealth 

creation in urban areas. This report focuses on wealth creation in rural 

areas, particularly the means by which it is created. In part, this is because 

promoting sustainable rural development is one of the main missions of 

USDA. Furthermore, the opportunities, constraints, and requirements of 

wealth creation are often different in rural contexts than in urban ones. For 

example, natural resources and amenities are generally more important as 

a form of wealth and as a contributor to economic development in rural 

areas than in urban areas. On the other hand, many rural areas lack access 

to infrastructure and facilities that are common in urban areas—such as 

airports, highways, hospitals, universities, wastewater treatment systems, 

and high-speed Internet—due to their low population density, distance from 

population centers, and the fi xed costs of such assets. Rural areas often lack 

other kinds of assets, particularly human capital, for similar reasons. Rural 

economic development strategies must take these different asset endowments 

into consideration. 

This is not to argue that rural wealth creation should be pursued in a vacuum. 

Indeed, development of rural areas may depend upon broader development in 

the regional economy, with urban centers as a hub. 
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Why Is Wealth Creation Important for Rural 

Economic Development?

Since wealth as we have defi ned it is the stock of all assets that can contribute 

to well-being, increasing well-being is almost synonymous with increasing 

wealth. Indeed, Arrow et al. (2010) proved that an increase in their concept of 

comprehensive wealth is necessary and suffi cient for an increase in intergenerational well-being. This follows from using “shadow prices” on each asset 

to measure the value of comprehensive wealth.5 Our defi nition avoids this 

nearly tautological implication by allowing for the possibility that investments 

in assets may not increase the well-being of some (or any) people. 

Whether investments in wealth improve the well-being for some or all people 

in a community depends upon the distribution of costs and benefi ts among 

community members and whether the social benefi ts of the investment 

exceed the social costs. These impacts depend upon many factors, such as 

uncertainty about the benefi ts and costs of the investment, who is making the 

investment, who is entitled to the fl ow of benefi ts from it, and the costs and 

benefi ts that the investment may impose upon non-investors. For example, 

an investment in a new factory in a community will benefi t the owners 

of the factory if the investment is profi table, and will also benefi t people 

directly employed by the factory and others whose incomes are indirectly 

increased by the demand generated by the investment. The investment may 

also increase the wealth of local landowners if it results in increased property values. This, in turn, contributes to increased local government property 

tax revenue, causing additional benefi ts and costs to community members 

depending on how this revenue is used.

But business investments also may displace workers, especially if the investments are in labor-saving technology, or may undermine the competitiveness of existing fi rms and the returns earned by their workers and assets.6

Increases in property values can impose higher costs on renters. Furthermore, 

if the owners of the fi rm making the investment live outside the community, 

the profi ts earned do not necessarily benefi t the community where the investment is made. Investments can also reduce property values; for example, the 

investment may cause pollution, noise, congestion, or otherwise reduce the 

attractiveness of the community.

Although simply increasing the aggregate wealth of a community may 

not be suffi cient to improve the well-being of everyone in the community, 

wealth creation in a broad sense is necessary to sustain economic development. Without increases in comprehensive wealth, growth in income and 

consumption cannot be sustained over the long term (Arrow et al., 2010). 

For example, a community may achieve near-term increases in income by 

depleting its mineral wealth, but unless the rents received are invested in 

reproducible capital, such growth will not be sustainable (Hartwick, 1977). 

Even without depleting natural capital, economic growth theory has shown 

that economic growth eventually stagnates as a result of diminishing returns 

to produced capital (Solow, 1956), unless investments are made in a broader 

span of capital, such as human capital and knowledge (Barro and Sala-iMartin, 1995). 

5“Shadow prices,” as defi ned by 

Arrow et al. (2010), are the marginal 

contribution of an increase in the stock 

of an asset to intergenerational wellbeing, measured in monetary terms. 

If all assets are valued at such shadow 

prices, it follows that an increase 

in the stock of any asset leads to an 

increase in intergenerational well-being. 

Well-being can only increase if the 

shadow value of all assets increases, 

according to Arrow et al., because they 

assume that the set of assets included 

in comprehensive wealth includes 

everything that infl uences well-being. 

Consideration of exogenous non-wealth 

factors would presumably change this 

proposition slightly (i.e., the proposition would hold if exogenous factors 

are held constant).

6This is an example of the process of 

“creative destruction,” through which 

investments in new products, technologies, or other innovations undermine 

the profi tability of existing fi rms and 

assets, potentially leading to obsolescence, bankruptcies, or other manifestations of the forces of innovation and 

competition. Schumpeter (1975) argued 

that this concept is “the essential fact 

about capitalism.” This concept has 

been infl uential in modern endogenous 

economic growth theory (Aghion and 

Howitt, 1992).
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Since people’s income and consumption prospects depend upon their wealth, 

long-term solutions to poverty require efforts to generate and use wealth 

effectively. People with low wealth may get locked in poverty because of 

their inability to cope with risks or to invest in high-return assets and activities (Carter and Barrett, 2006). Unfortunately, many social policies in the 

United States have ignored the importance of wealth, instead subsidizing 

the income or consumption of the poor in lieu of wealth accumulation 

(Sherraden, 1991). Without income support, poor people would undoubtedly 

be worse off, but wealth accumulation remains critical to achieving longterm reductions in poverty.

Given the importance of wealth for economic well-being, understanding how 

wealth is distributed is critical. The marketable wealth (net worth of physical 

and fi nancial assets) of households in the United States is more unequally 

distributed than income. In 2007, the top quintile of wealth holders owned 

85 percent of total household marketable wealth, while the top quintile of 

income recipients in 2006 received 61 percent of total income (Wolff, 2010, p. 

44). Blacks continue to lag Whites in marketable wealth, even among groups 

with similar levels of education and income, limiting their ability to achieve 

economic parity (Shapiro, 2004).

Understanding the distribution of wealth across and within communities 

is also critical if community-level interventions are to be most effective in 

building on existing assets. Unfortunately, information on the distribution 

of assets across and within U.S. communities is limited. (We discuss data 

sources on regional distribution of wealth later in the report.)

The distribution of wealth—or more generally (for assets that are not 

privately owned or whose costs and benefi ts are not appropriated fully by 

their owners), who receives the fl ows of services emanating from wealth 

and who pays the costs of creating and maintaining it—is critical not only 

because this determines the distribution of well-being. Whether individuals 

or businesses have the incentive and ability to create wealth depends upon 

how these costs and benefi ts are distributed. Economists theorize that two 

characteristics of any good or asset largely determine whether private individuals or fi rms have adequate incentive to produce or invest in them: whether 

others who do not pay for providing the good can be excluded from the 

benefi ts that the good generates (“excludability” of the benefi ts), and whether 

use of the services from the good reduces its availability to others (“rivalry” 

of the benefi ts) (Cornes and Sandler, 1996). Goods whose benefi ts are nonexcludable (or excludable only at high cost) are likely to be underprovided 

by private markets because of the potential for “free riders” who do not pay 

for the services provided. Goods whose benefi ts are nonrival (or that require 

small additional costs to provide to additional people once initial fi xed costs 

of provision are paid) tend to favor production by monopolies (like electric 

companies) rather than competitive markets, which can also lead to ineffi cient 

provision. Goods that are both non-excludable and nonrival are considered 

pure public goods and may require government provision (the classic example 

is national defense).7

Many types of assets are both excludable and rival in use, and thus are 

provided by competitive private markets. Examples include many physical 

assets (houses and buildings, vehicles, machinery and equipment) and 

7Public goods may be provided 

by private agents rather than 

by governments under certain 

circumstances. If property rights to 

the good can be assigned and enforced 

at low cost as a result of changes in 

technology or institutions, a public 

good could then become a private 

good. For example, improvements 

in technologies to collect tolls on 

highways (increased excludability), 

together with increased congestion of 

many highways (increased rivalry), 

have encouraged conversion of some 

freeways to toll roads (Cowen 2008). 
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fi nancial assets (stocks and bonds). Many other types of assets involve some 

degree of non-excludability and thus may be underprovided due to free-rider 

problems. For example, natural capital stocks provide many environmental 

services—such as clean air, scenic beauty, and preservation of biodiversity—that are diffi cult to exclude people from. Intellectual capital investments, such as technical innovation, are often at least partly non-excludable 

(Romer, 1990), although intellectual property protections seek to increase 

the excludability for a defi ned period of time. The benefi ts that result from 

social networks may not be limited to those participating in the network 

(Putnam, 1993). For example, a network of mothers that organizes to 

improve local schools benefi ts all who attend the schools (Coleman, 1988). 

Similarly, investments in political and cultural capital often benefi t people 

other than the investor, such as the constituents of a politically powerful 

member of Congress or future generations who benefi t from the cultural 

legacy of their ancestors.

For assets that are non-excludable or nonrival, other actors besides private 

individuals and fi rms may be needed to ensure that socially profi table investments are made. In some cases, such as national defense, this requires Federal 

involvement. However, in many cases, the non-excludability or nonrivalry 

is relevant mainly at a local level (e.g., local roads), in which case a local 

government or community-based organization may provide the asset or can 

facilitate its provision by private actors. For many other assets involving some 

degree of non-excludability or nonrivalry at the local level—like investments 

in local parks, primary/secondary education, or preservation of local cultural 

heritage—local governments and civic organizations often play a critical role 

in creating wealth.
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How Can Wealth Be Created in Rural 

Communities?

The creation of wealth requires savings and investment, which presume a 

willingness and ability to forgo consumption in the present for the sake of 

increased well-being in the future. However, patience and thrift alone are 

insuffi cient to accumulate wealth.8 Investing in assets that yield low or negative returns can impoverish rather than enrich. Economic growth theorists 

often abstract from this concern by assuming that (1) decisionmakers have 

perfect foresight about the future; (2) only a single type of capital exists, 

with a very high rate of return at low levels of capital stock; and (3) constant 

returns to scale are in effect, implying diminishing returns to capital investments and the possibility of perfect competition (Solow, 1956). If more than 

one type of capital exists, growth theorists often assume the marginal net 

returns to investments in different types are equalized through perfectly 

competitive markets (Barro and Sala-i-Martin, 1995). 

Reality is of course much more complex, with investments in many different 

types of capital possible, complicated relationships among different types of 

capital that affect the returns to investments, economies of scale for many 

investments, missing or imperfect markets for many types of capital and 

for the goods and services that they generate, fi nancial constraints limiting 

many people’s ability to make profi table investments, and uncertainty about 

the returns to all investments. Furthermore, not everyone who makes investment decisions is a private fi rm seeking to maximize the net present value of 

profi ts.9 Other actors such as households, governments, and nonprofi t organizations also make investment decisions based upon varying objectives and 

decision rules. And the impacts of investments may include nonmonetary 

costs and benefi ts, such as impacts on the environment or on the social fabric 

of a community.

Creating wealth in rural communities therefore requires not only that 

decisionmakers be willing to save and invest, but also that they be able to 

identify, fi nance, and implement socially profi table investments through 

a continuous learning process. Which investments are profi table, or even 

feasible, is likely to depend on the wealth endowments of the local actors 

and upon the economic, institutional, and policy context within which such 

decisions are made. 

Conceptual Framework for Wealth Creation

Understanding how wealth can be created and sustained in rural areas 

requires a conceptual framework that encapsulates the diverse contexts and 

complex set of factors infl uencing the process and its outcomes (fi g. 2). Our 

framework for wealth creation draws upon other frameworks in the rural 

development literature,10 and includes eight types of wealth—physical, 

fi nancial, natural, human, intellectual, social, cultural, and political capital 

(see box, “Defi nitions of Types of Wealth”). There is arguably some overlap 

among these types of capital; for example, political capital could be viewed 

as a special type of social capital in that it involves networks, reciprocal obligations, and mutual trust among actors in the political realm. 

8Technically, patience and thrift are 

not even necessary to increase wealth, if 

we consider capital gains resulting from 

increases in the price of assets. The 

increase in wealth of U.S. households 

resulting from the housing and stock 

market booms during the 1990s and 

early 2000s contributed substantially 

to increased consumption and low 

savings during this period, according 

to numerous studies (see Wilkerson 

and Williams (2011) for a review). 

Nevertheless, the fallout from subsequent stock market and housing busts 

indicates that reliance on such asset 

price booms to fi nance consumption 

can be risky and unsustainable.

9Profi t-motivated private fi rms and 

individuals do not necessarily seek 

to maximize the expected net present 

value of profi ts, if confronted with 

uncertainty and imperfect insurance 

markets, unless they do not care about 

risk (i.e., they are “risk neutral”). Even 

risk-neutral private investors will not 

invest based on the net present value of 

profi ts if they are credit constrained, or 

if investments involve “sunk costs” (i.e., 

costs that can’t be fully recouped later 

by selling the asset) and future profi ts 

are uncertain (Fafchamps and Pender, 

1997; Dixit and Pindyck, 1994).

10Kretzmann and McKnight, 

1993; Carney, 1998; Castle, 1998; 

Bebbington, 1999; Green and Haines, 

2002; de Janvry, 2003; Flora and Flora, 

2004; Pender et al., 2006; Reimer, 

2006; Ratner, 2010. See appendix B.
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In our framework, we focus on assets that are owned or controlled by actors 

in the rural community, including individuals, households, businesses, 

nonprofi t civic organizations, and local governments. At the local level, 

the assets controlled by these actors are “endogenous,” meaning that decisions made by local actors directly affect the accumulation or depletion of 

the assets. Other assets that affect local decisions but that are controlled by 

external actors—such as Federal and State lands and highways, electrical and 

telecommunications systems, and universities—are treated as part of the local 

economic, institutional, and policy context (not local assets). 

At the center of the framework are the decisions made by local actors. Key 

economic decisions include long-term choices about livelihood strategies, such 

as what business enterprises and occupations to pursue and where to live; what 

investments to make; how much of particular goods and services to produce 

or provide and what inputs to use in their production; how much of different 

goods and services to consume; and what incentives, supports, or regulations 

may be used by local governments to infl uence private investments. 

Local actors’ endowments of different types of wealth determine what opportunities are available and the attendant costs, returns, risks, and constraints 

(indicated in fi gure 2 by the arrow from the wealth box to the local actors 

and decisions box). These decisions are also affected by the economic, 

institutional, and policy context, such as the functioning of markets and the 

prices determined for various goods and services; technological innovations 

affecting the feasibility of economic opportunities; local laws, regulations, 

Source: USDA, Economic Research Service.

Figure 2

General wealth – decisions – outcomes framework

Economic/Institutional/Policy Context

s-ARKETSANDTECHNOLOGIES

s,AWSANDREGULATIONS

s0OLICIESANDPROGRAMS

s.ATURALPHENOMENA

s#ONFLICTWAR

Wealth of local actors

s0HYSICALCAPITAL

s&INANCIALCAPITAL

s.ATURALCAPITAL

s(UMANCAPITAL

s)NTELLECTUALCAPITAL

s3OCIALCAPITAL

s#ULTURALCAPITAL

s0OLITICALCAPITAL

Local actors

s)NDIVIDUALSHHDS

s"USINESSES

s#IVILSOCIETYORGS

s,OCALGOVERNMENTS

Outcomes

s%CONOMIC

s3OCIAL

s%NVIRONMENTAL

Actors’ decisions

s,IVELIHOODSTRATEGIES

s)NVESTMENTS

s0RODUCTION

s#ONSUMPTION
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and policies; Federal and State programs; and even natural phenomena such 

as natural disasters or climate change.

Conditional upon actors’ endowments and local context, wealth creation decisions lead to outcomes such as changes in employment, income, property 

values, and tax revenues (economic); changes in poverty, education, health, 

and nutrition (social); and changes in air and water pollution, land quality, 

biodiversity, and carbon stocks (environmental).

Defi nitions of Types of Wealth

Physical capital – Includes the stock of produced capital goods (i.e., buildings 

and equipment) used by fi rms to produce outputs; infrastructure used by fi rms 

and households to reduce costs of commerce (e.g., roads, bridges, waterways, 

telecommunication networks); and durable goods used by households for either production or consumption purposes (e.g., buildings, vehicles, household 

equipment).

Natural capital – The stock of naturally occurring assets that yield a fl ow of 

valuable goods or services into the future (e.g., air, water, land, minerals, fl ora 

and fauna) (Costanza and Daly,1992). Natural capital includes renewable natural 

resources such as ecosystems and non-renewable resources such as fossil fuel and 

mineral deposits. 

Financial capital – Money and other liquid fi nancial assets (assets than can be 

readily sold and converted to money), such as stocks, bonds, futures contracts, 

and letters of credit, net of fi nancial liabilities.

Human capital – Human capital investments were defi ned by Becker (1993) as 

investments that “improve skills, knowledge, or health, and thereby raise money 

or psychic incomes” of people. Examples of human capital include the level of 

education, training, and health of workers.

Intellectual capital – Knowledge and innovation. Unlike human capital, which 

is embodied in individuals, intellectual capital exists separately from individuals 

and is thus “nonrival” in nature, meaning its use by one agent does not reduce its 

availability to others (Romer, 1990). Examples include knowledge and innovations stored in books, articles, patents, etc.

Social capital – Defi ned by Putnam (1993) as “features of social organization, 

such as networks, norms, and trust, that facilitate coordination and cooperation 

for mutual benefi t.” Examples include formal organizations and informal associations and networks, such as networks of migrant workers and the social relationships that bind them.

Cultural capital – Defi ned by Flora and Flora (2004) as people’s understanding 

of society and their role in it, values, symbols, and rituals. An example is the 

“Protestant work ethic,” which Weber (1905) argued was an important factor 

contributing to the rise of capitalism in the West.

Political capital – Defi ned by Flora and Flora (2004) as “the ability of a group 

to infl uence the distribution of resources within a social unit.” An example is the 

political strength held by farm lobbies and agribusiness companies in agricultural 

policy circles.
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These decisions and outcomes often change the level of capital stocks—like 

depletion of natural capital stocks resulting from water pollution or improvement in human capital stocks resulting from investments in education and 

health—with consequences for future wealth creation (indicated in fi gure 2 

by the arrows from the decisions and outcomes boxes to the local assets box). 

Over a larger scale and longer period of time, local wealth decisions may also 

affect the community’s economic, institutional, and policy context (indicated 

by the dashed arrows).

Applying the Framework: An Example Based on 

Corn Ethanol Production

Many local actors have played important roles in the expansion of ethanol 

production in rural areas. Local individuals and businesses, particularly 

farmer cooperatives, invested in ethanol plants in the past decade as the 

demand for ethanol boomed (Low and Isserman, 2009; Bain, 2011). The 

number of U.S. ethanol plants quadrupled from 54 in 2000 to 204 in 2010, 

mostly in rural areas, while the production capacity increased nearly eightfold 

(Renewable Fuels Association (RFA), 2011). Many of these investments were 

made by local investors. Between 2002 and 2006, 21 of 35 new ethanol plants 

were owned by local farmers (http://www.afdc.energy.gov/afdc/data/docs/

ethanol_plant_ownership_capacity.xls). However, since 2006, owners of new 

ethanol plants have been primarily nonlocal, and locally owned plants’ share 

of production capacity has declined from 39 percent in 2006 to 15 percent in 

2011 (RFA, 2011). 

Ethanol investments have been facilitated by local government actions 

like provision of tax increment fi nancing, land donations, tax-funded land 

improvements, and property tax abatements, in addition to Federal and State 

incentives (Koplow, 2006). Assistance by local governments to help identify a 

suitable site, improve infrastructure, change zoning regulations, provide water 

and other public services, and obtain the necessary environmental permits is 

often critical to an ethanol plant’s startup (Karetnikov et al., 2008). Support 

or opposition by local community members can infl uence whether and where 

plants are sited and what concessions are required to satisfy local stakeholders. For example, in 2006 community members in Cambria, Wisconsin, 

opposed construction of an ethanol plant in their town due to concerns about 

noise pollution, traffi c congestion, and water supply, based on the record of an 

ethanol plant in a neighboring town (Karetnikov et al., 2008).

Local wealth endowments have been critical in enabling local actors to invest 

in ethanol production. Ethanol plants have mostly been built in rural areas 

having productive farmland and suffi cient rainfall/irrigation water for corn 

production and water for ethanol processing (Low and Isserman, 2009). 

Ethanol plants usually purchase the corn feedstock from within a 50-mile 

radius. Proximity to livestock feeding operations enables ethanol producers 

to sell the byproduct, wet distillers’ grain. Local human capital—particularly 

entrepreneurial talent, managers, and other professional staff—have also been 

important in establishing locally owned plants (Urbanchuk, 2006). 

Farmer-owned cooperatives spearheaded investments in ethanol plants early 

on, indicating the importance of these organizations’ fi nancial capital (Bain, 

2011). However, as the scale of ethanol plants has increased, fewer plants 
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are local farmer-owned. The social capital of farmer organizations may have 

helped to instill local support for these investments, but the trend toward 

corporate ownership may be undermining such support. However, a recent 

study of community attitudes toward ethanol plants (two communities in 

Kansas and one in Iowa) found that the ownership structure did not matter as 

much as the plant’s civic performance (Selfa et al., 2011).

Investments in ethanol plants have been affected not only by local assets and 

inclinations, but also by contextual factors like proximity to urban markets, 

interstate highways, and railroads; the price of ethanol relative to corn and 

other inputs in ethanol production; and Federal/State policies to promote 

ethanol production (Low and Isserman, 2009). Three-fourths of U.S. ethanol 

plants are within 10 miles of a major U.S. highway or interstate highway, and 

most are located on a railroad to economize on shipping costs. Infl uential 

Federal policies include the Renewable Fuels Standard (RFS) enacted in the 

Energy Policy Act of 2005 and amended by the Energy Independence and 

Security Act of 2007 (RFS2); a Federal tax credit for ethanol-blended gasoline and an additional tax credit for small ethanol producers; and a tariff on 

imported ethanol. 

State policies promoting ethanol include partial or complete bans on the use 

of methyl tertiary butyl ether, an oxygenate that has been replaced by ethanol 

in gasoline; ethanol producer incentive programs; and renewable fuel standards. Many States provide exemptions from fuel taxes or sales taxes for 

ethanol blends (Koplow and Steenblik, 2008).11 Several States also provide 

production payments or tax credits for ethanol producers, as well as capital 

grants, credit guarantees, tax-exempt bonds, regulatory exemptions, and other 

assistance to ethanol producers and consumers. In some States, farmer-owned 

ethanol refi neries receive preferential support. Koplow and Steenblik (2008) 

valued Federal and State support to the ethanol industry in 2008 at an estimated $9.2-$11.1 billion (mostly due to Federal policies). 

Despite government subsidies, the profi tability of ethanol refi ning has 

declined dramatically since 2006 (fi g. 3), with estimated profi t margins of 

a typical ethanol plant in Iowa averaging less than 10 cents per gallon in 

the fi rst 6 months of 2011 (Hofstrand, 2011). Although ethanol prices have 

rebounded after a decline from mid-2008 through mid-2010, corn prices have 

also rebounded, leaving thin margins for the industry. Not surprisingly, as 

profi ts have decreased, ethanol plant expansion has slowed (RFA, 2011).

The profi tability of ethanol production has also been affected by technological changes within the industry. Since the 1980s, ethanol production has 

become much more effi cient as smaller plants failed and were replaced by 

larger ones. Several new processing techniques reduced input requirements—

particularly energy and water use—and increased yields per bushel of corn, 

cutting costs. Ever larger plants have further reduced production costs since 

the late 1990s (Shapouri and Gallagher, 2005).

Ethanol plant investments have led to a variety of economic, environmental, 

and social outcomes. A plant producing 100 million gallons per year (MGY) 

of ethanol has been estimated to generate $203 million in annual sales, 

employ 39 full-time-equivalent workers, and pay $2.4 million in annual 

wages (Low and Isserman, 2009). These direct economic effects lead to 

11The fuel tax exemptions averaged 

11.5 cents per gallon across States 

studied for gasoline with 85% ethanol 

(E85) in 2007 (Koplow and Steenblik, 

2008).
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indirect effects on the local economy as a result of local purchases of goods 

and services by the plant and by the local fi rms that supply the plant and 

induced economic effects due to increased consumption expenditures by 

employees of the plant, its suppliers, and their suppliers. The size of these 

indirect and induced effects depends on many factors, including the size and 

diversity of the local economy, the relative integration of the local economy 

with the broader economy, the profi tability of ethanol production, and the 

share of ethanol plants owned by local people. Across four proposed plants in 

Illinois and Nebraska, Low and Isserman (2009) estimated that the number 

of jobs induced by an ethanol plant could range from as few as 65 to as many 

as 211, and that the indirect or induced economic output could range from 

$8 million to $33 million per year. These results are consistent with local 

impacts estimated by several other studies, although a few studies have estimated much larger impacts.12

Even though the aggregate amount of ethanol produced is likely driving up 

total demand for corn, crop prices, production, and land use (USDA, 2007; 

Fortenbery and Park, 2008; Searchinger et al., 2008; Hertel et al., 2010), a 

single corn ethanol plant likely has limited impact on local corn prices and 

production (Swenson, 2007b). Still, a small local price premium for corn has 

been observed near 12 ethanol plants in the Midwest, averaging about $0.125 

per bushel at the plant site (ranging from $0.05 to $0.19 per bushel), with a 

positive price impact as far as 68 miles from the plant (McNew and Griffi th, 

2005). Low and Isserman (2009) estimated that local impacts from the corn 

12For example, studies by Petersan 

(2002); Peters (2007), and Swenson 

(2007a) have similar employment 

multipliers. By contrast, in a report 

for the Renewable Fuels Assocation, 

Urbanchuk (2008) estimated that a 

100-MGY ethanol plant would lead 

to 1,137 additional jobs in the local 

economy and 1,790 jobs statewide. 

The higher impacts were due to 

Urbanchuk’s assumption that local 

ethanol production would lead to much 

higher local corn production. Swenson 

(2007b) argued this is not tenable 

because the corn used for local ethanol 

production would come primarily from 

reduced corn exports from the State, 

rather than from increased production. 

Source: Estimates from Hofstrand (2011)

Figure 3

Estimated revenues, costs, and profits of a typical ethanol plant, Iowa Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-0.5

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Revenue per gallon

Total cost per gallon

Profit per gallon

Dollars
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price premium were much smaller than the effects of plant operations on 

local income and employment.13

An ethanol plant also affects local property values; rents, royalties, and dividends received by local residents; and local tax revenues. Henderson and 

Gloy (2009) estimated that farmland values in the Great Plains were signifi -

cantly higher closer to an ethanol plant, consistent with the local corn price 

premium. Impacts of ethanol plants on residential property values are less 

clear.14 A few studies have estimated positive impacts on property income 

and tax revenues.15

Locally owned plants likely generate greater local economic impacts 

for two reasons: (1) locally owned plants tend to spend more in the local 

economy to hire professional staff and borrow more from local banks; and 

(2) local owners spend some of their plant dividends in the local economy 

(Urbanchuk, 2006). 

Local ownership does not guarantee that most of the benefi ts of the plant will 

be received by local stakeholders, however. The profi t margins of ethanol 

plants have recently shrunk; dividend payments to local owners have likely 

declined as well. At the same time, a greater share of ethanol returns has 

gone to corn farmers in general as corn prices have risen (Hofstrand, 2011). 

Thus, except for local benefi ts caused by the local corn price premium 

(which doesn’t depend on local ownership of the ethanol plant), the benefi ts 

of increasing corn prices resulting from ethanol production are felt widely 

by farm communities, while many of the economic and environmental costs 

of living near a plant are felt locally, especially if residential property values 

fall. As a result, the net benefi ts that most local stakeholders perceive from 

ethanol plants—even locally owned ones—may be limited and could change 

fairly quickly. Case studies of community perceptions of ethanol plants 

confi rm that the greatest perceived benefi ciaries are local farmers, investors, 

and plant employees, with limited economic benefi ts (and some quality-of-life 

infringements) envisioned for other community members (Bain, 2011; Selfa 

et al., 2011).

Local environmental impacts of ethanol plants may include air pollution, 

increased demand on freshwater supplies, and water pollution. Air pollution 

can result from the fermentation process and from burning fossil fuels or 

biomass to boil liquids and dry the distillers’ grain byproducts.16 The total 

amounts emitted are very small compared to current national emissions, 

although impacts near ethanol plants for particular pollutants can be signifi -

cant (EPA, 2011). Corn ethanol plants typically consume about 3-4 gallons 

of freshwater for each gallon of ethanol produced. The amount of water 

consumed by a 100-MGY ethanol plant is comparable to the water consumed 

by a town of 5,000 people (NRC, 2008). This demand can have locally 

signifi cant impacts, especially where groundwater supplies are increasingly 

scarce, such as in the high plains of south-central Nebraska (NRC, 2008). 

Water quality issues can result from the discharge of effl uents from cleaning 

salts that build up in cooling towers and boilers, and from the disposal of 

brine water that results from water purifi cation measures, although the 

Environmental Protection Agency does not consider corn ethanol plants to 

cause any major effl uent quality issues (EPA, 2011).

13For example, the maximum impact 

estimated by Low and Isserman 

(2009)—assuming a corn price 

premium of $0.35 per bushel—was to 

increase total employment by 28 jobs in 

the largest county considered, compared 

to an impact of 250 additional jobs from 

plant operations in the same county.

14We found only two unpublished 

studies of the impacts of ethanol 

plants on residential property values. 

Turnquist et al. (2008) found statistically insignifi cant associations between 

residential property values and distance 

to an ethanol plant in Wisconsin. Hodge 

(2011) found that residential property 

values were as much as 18 percent 

lower near an ethanol plant (as far as 2 

miles away) in Michigan, but that these 

impacts varied across locations.

15For example, the Clean Fuels 

Development Coalition estimated that 

a 100-MGY ethanol plant in Nebraska 

would increase local annual property 

income by $4.45 million and pay $1.06 

million in property and other taxes, 

plus an additional $0.49 million in local 

tax collections due to the additional 

economic activity resulting from the 

plant (CFDC, 2008).

16Ethanol production also affects 

emissions of greenhouse gases, though 

these impacts result mainly from the 

aggregate impacts of replacing fossil 

fuel combustion with renewable fuel 

sources and the associated changes in 

use of agricultural land and other agricultural inputs, rather than ethanol plant 

operations (Searchinger, 2008; Hertel et 

al. 2010; USEPA, 2011)
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The social impacts of increased ethanol production on rural areas of the 

United States have been less well studied than the economic and environmental impacts. The literature concerned with social impacts has focused on 

impacts of aggregate biofuel production on people in developing countries, 

particularly food consumers in low-income developing countries (e.g., Naylor 

et al., 2007; Rosegrant et al., 2008; Cushion et al., 2010). Consumers in the 

United States are also affected by food price impacts of biofuel production, 

although the impacts are generally considered to be small. For example, EPA 

(2010) estimates that annual food expenditures of U.S. consumers would 

be increased by $10 per capita as a result of implementation of the Energy 

Independence and Security Act’s biofuel standards. EPA (2010) also estimates adverse health impacts resulting from increased air pollution due to 

biofuel production, with annual costs valued at $600 million to $2.2 billion 

(less than $10 per capita). A few case studies reveal community concerns 

about noise and traffi c congestion from ethanol plants, along with concerns 

about water use, odors, and air pollution (Karetnikov et al., 2008; Selfa et 

al., 2011). Estimates of other potential social impacts of ethanol production 

in rural areas—such as impacts on the distribution of income and wealth, 

poverty rates, and education—are not available. 

Decisions made by local actors related to ethanol production may affect 

local wealth endowments, altering the prospects for future wealth creation. 

For example, increased local tax collections resulting from a new ethanol 

plant may enable public investments in local roads, schools, or other infrastructure, which can spur future wealth creation. Increased farm income 

and farmland values may enable farmers to invest in new farm equipment 

or other private assets. On the other hand, negative environmental impacts 

such as depletion of local groundwater supplies or air pollution may impair 

a community’s ability to attract or retain residents. Failure of the proponents 

of an ethanol plant to address citizens’ concerns about adverse social or 

environmental impacts can undermine future efforts to achieve local support 

for such investments.

Over a larger scale and a longer term, the aggregation of decisions by local 

actors and their impacts may infl uence the economic, institutional, and 

policy context for local ethanol production. For example, increased ethanol 

production is contributing to increased corn prices, which has reduced the 

profi tability of ethanol processing since 2006. Accumulating experience with 

the benefi ts and costs of ethanol processing, including the costs of subsidies, can cause people’s attitudes and State and Federal policies to evolve, 

sometimes to the detriment of existing plants. Thus, the dynamics of wealth 

creation related to ethanol production, as with other economic opportunities in rural America, may respond in complex ways to changing assets and 

contexts, resulting in part from the initial investments made in response to 

the opportunity.

Implications of the Framework

This framework and example illustrate several key points about the process 

of rural wealth creation. For one, the process is highly context-dependent: 

its success is largely fueled by the wealth endowments of local communities, businesses, and households and contingent on the existing economic, 

institutional, and policy context. For example, policies to promote biofuel 
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production have created wealth in communities with fertile farmland and 

water, transportation infrastructure, fi nancial resources, and an entrepreneurial class of farmers or other investors capable of organizing and 

managing such investments (Low and Isserman, 2009). Where these factors 

are absent, efforts to promote biofuel production may be unsound and could 

deplete local wealth. Even where these conditions are present, changes in 

market conditions (such as rising prices of corn relative to ethanol) or in policies (such as elimination of subsidies and trade protections for ethanol) could 

render investments in biofuels unprofi table.

The ethanol example illustrates another key point. Different types of capital 

are often complementary; investing in one type of capital can increase the 

returns to investing in another. For example, prior investments in transportation infrastructure likely increase the returns to ethanol investments. As such, 

planning and coordinating across a range of investments is likely critical to 

the success of rural development efforts. 

Many investments occur sequentially, as the returns from one investment 

enable subsequent investments to take place. For example, if ethanol production leads to increased local tax revenues, this may enable increased investments in local schools or other facilities. Realizing the potential to stimulate 

a positive and sustainable cycle of investment requires adequate consideration 

of such dynamic linkages in local development planning efforts.

Even if different types of investments are not complementary, it is important to consider all types of capital investments in order to achieve a desired 

outcome at lowest cost or with fewest undesirable side effects. For example, 

it might prove cheaper to reduce net greenhouse gas emissions by planting 

or protecting trees (natural capital) than by promoting investments in 

ethanol plants (physical capital), considering that the net benefi ts of corn 

ethanol production in that regard are controversial (e.g., Farrell et al., 2006; 

Searchinger et al., 2008; Hertel et al., 2010; EPA, 2010; USDA ERS, 2011).

The biofuels example illustrates that investments in rural wealth creation 

are risky, as evidenced by the declining profi tability of ethanol processing 

since 2006. One way to reduce exposure to risks is portfolio diversifi cation, 

or investing in different types of assets and ventures that have uncorrelated 

or negatively correlated risks.17 For example, an agricultural community 

that invests in both ethanol and corn production will have offsetting risks 

associated with corn prices (holding ethanol prices constant). However, 

this strategy would not address risks associated with changing demand for 

ethanol. Broader diversifi cation of the local economy into activities not much 

affected by ethanol demand (such as natural amenity-based development) or 

that benefi t when corn and ethanol prices fall (such as livestock production) 

would more effectively address this type of risk. 

The ethanol example also demonstrates the importance of who owns the 

assets that are being invested in, who bears the costs, and who receives the 

benefi ts. Locally owned ethanol plants led the expansion of the sector for 

several years, but are becoming less common. As a result, the local economic 

impacts of ethanol production may be diminishing. 

17There is a substantial literature on 

the risk-reducing benefi ts of industrial 

diversifi cation of regional economies 

and potential tradeoffs with economic 

growth, dating from Conroy (1974). 

For a recent example and review of this 

literature, see Spelman (2006).
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Local ownership also relates to the issue of risk. If local investors focus 

primarily on local assets, they are likely to face greater risks than if their 

portfolio included assets located outside of the community. A local plant’s 

closing would devastate the assets of community-focused investors more so 

than those of more diversifi ed investors. Furthermore, local investors may 

miss opportunities to invest in assets elsewhere that offer higher returns. 

In a few case studies of ethanol plant investment, community leaders have 

acknowledged that dividends earned by local investors can benefi t the local 

economy regardless of their source (Bain, 2011; Selfa et al., 2011).

In summary, the ethanol example illustrates many challenges associated with 

efforts to promote rural wealth creation. The challenges of context dependence, the risks associated with a changing context, complex and dynamic 

relationships among different types of wealth, and the multidimensional 

impacts and dynamic feedback effects of wealth creation strategies explain 

why rural wealth creation is not an easy task. Yet, the approach offers the 

potential to contribute to sustainable and broadly shared rural prosperity 

through well-focused investments in wealth creation that are suited to the 

local context. Ethanol production is of course only one of many possible strategies to promote rural wealth creation. The next section discusses a broader 

set of strategies, the assets that they build on and build up, and their suitability to different contexts.

Economic Development Strategies and 

Rural Wealth Creation

Economic development strategies are only a subset of possible approaches to 

rural wealth creation, though efforts to create wealth benefi t greatly if they 

are part of a coherent strategy based on local comparative advantages and 

community priorities. Coherence and coordination of investments across 

different types of assets are particularly important given the frequent need for 

sequencing: i.e., infrastructure before industry.18

Some development strategies, particularly regional ones, can give communities access to some of the wealth in neighboring communities. Such 

intercommunity collaboration, as well as collaboration among various stakeholders within a community, can create synergies in wealth creation over 

time. Economic collaboration and sustainability is particularly important for 

rural areas because so many rural communities are sparsely populated, and 

the closing of one or two key local businesses can hurt the local economy, 

leading to wealth depletion. To improve local economic resilience, many rural 

economic development strategies emphasize diversifi cation, integration with 

the broader (and presumably more stable) regional economy, or establishment 

of industries with a comparative advantage in the national or global economy. 

Traditional Approaches 

Several longstanding approaches to rural economic development—industrial 

recruitment, regional centers, bedroom communities, and amenity-based 

development—have the potential to create and perpetuate wealth. The 

success of each strategy is highly dependent on the local and regional context 

(see table 1 for local attributes associated with each of these strategies).

18Our focus is on local or regional 

strategies and policies. Federal and 

State government programs and policies 

are also very important for rural wealth 

creation. These include policies that 

are independent of local and regional 

strategies (such as tax incentives to 

encourage individuals to save) and policies that interact directly with local and 

regional strategies (such as those that 

help fi nance these strategies).
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Industrial Recruitment

Historically, the approach most commonly taken to diversify a local economy 

has been to recruit businesses into the community. Local offi cials often do 

this by promoting their rural community’s appeal to businesses, such as lowcost labor and cheap land, or by offering business incentives (tax breaks, free 

land, etc.) to incoming fi rms. This approach can create wealth because most 

of the targeted businesses export their products outside the locality, with a 

portion of the return fl owing back to the community in the form of wages, 

purchases of local inputs, and increased local tax revenue—which can then 

be used to acquire various forms of public and private wealth. This approach 

often exploits the local economy’s comparative advantages or local assets, 

such as mineral deposits or proximity to major transportation modes, and it 

Table 1

Rural development strategy typology

Strategy Approach Places most suited to strategy

Traditional

Industrial recruitment Attract traditional export-based industry using 

tax breaks and other concessions 

Places with low-cost, low-skilled labor force 

and convenient transport to sources of inputs 

and markets.

Regional center Expand retail and services sectors to attract 

workers and consumers from nearby towns

Places centrally located in rural regions, 

having good transportation access to rest of 

region

Bedroom community Provide good schools and residential 

amenities to commuters to larger cities

Places located near large and growing cities 

with good transportation to the cities

Amenity-based Provide public services desired by tourists, 

seasonal migrants, retirees

Places with good natural and/or cultural 

amenities, good transportation connections 

with population centers

Nontraditional

Small business 

entrepreneurship

Provide training, loans, tax incentives, and 

technical assistance to small business 

entrepreneurs; Use entrepreneurial 

development systems to establish an 

entrepreneurial culture

Any rural community with access to 

education, training, and technical assistance 

providers

Cluster-based Provide training, loans, and technical 

assistance to networks of similar fi rms

Any place that already has a concentration or 

cluster of similar fi rms with growth potential 

or having properties that could help establish 

such a cluster

Innovation and 

knowledge

Promote increased use of local educational 

and technological resources by local 

businesses

Any place with convenient access to higher 

education or technology resources

Creative class

Attract well-educated or creative people with 

goods and services they like, add amenities 

sought by well-educated or artistic people, 

assist their starting or growing of local 

businesses

Places with amenities, close to cities, with 

a concentration of small businesses/selfemployed working population

Source: USDA, Economic Research Service.
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can also be used to help diversify the local economy. Although this is consistent with optimal industrial location theory (Dawkins, 2003, p. 136) and 

“export-base” development theory advocated by economists such as North 

(1955), the industrial recruitment strategy has been criticized as being either 

ineffectual or too costly in terms of incentives provided to the fi rms. It nevertheless remains popular in many rural areas, even as larger business establishments—the most common targets of such strategies—increasingly locate 

overseas to achieve cost savings. 

Regional Centers and Bedroom Communities

Another traditional approach to rural development involves integration with 

the surrounding region by emphasizing a specialized function. For example, 

central places with relatively large rural populations and good transportation access may position themselves as regional centers (Duranton and Puga, 

2004). These regional centers are consistent with central place theory, which 

assumes a hierarchical system of central places (or cities) in which smaller 

cities import goods and services from larger cities (regional centers) in the 

region, while providing various inputs to the same larger cities (Dawkins, 

2003, p. 133). This strategy involves encouraging the growth of public and 

private goods and services that attract residents of neighboring communities to purchase these goods and services, providing an infl ow of money and 

wealth to the regional center community. 

In contrast, rural communities on the fringes of growing metropolitan areas 

may fi nd it advantageous to become bedroom communities from which 

residents commute daily to cities for employment.19 This strategy can be 

advanced by improving transportation infrastructure and making sure that 

the quality of housing and basic services suits the demands of commuters 

and their families (Heimlich and Anderson, 2001; Hayden, 2003). Because 

these commuters tend to have relatively high-wage jobs in urban areas, 

their incomes can add signifi cantly to the local tax and economic base, and 

the things they demand, such as high-quality schools, can also add to local 

wealth. 

Amenity-Based Development 

For places with signifi cant natural (or cultural) amenities such as mountains, 

lakes, and beaches, it may be possible to increase local income and wealth, 

diversify the economy, and achieve more sustainable rural development 

through increased tourism, recreation, and retirement development (Reeder, 

1998; Reeder and Brown, 2005; McGranahan, 1999).20 This amenity-based 

approach brings in visitors and can attract residents, providing the community 

with access to their wealth. The strategy involves promoting and improving 

the quality of, or access to, the amenities (natural and cultural capital), as 

well as improving public goods and services used by tourists, recreationists, 

and retirees. In addition to providing jobs, tax base, and income for business 

and property owners (fi nancial capital), amenity-based development can lead 

to improved public infrastructure and facilities (built capital) for all residents. 

This approach can also help integrate the community with the surrounding 

region if many of the visitors or retirees come from the surrounding area.

19Karl Fox’s “functional economic 

areas” emphasize the importance of 

this kind of spatial dependence of large 

cities upon workers in adjacent employment centers. This concept has been 

integrated into the U.S. Department 

of Commerce, Bureau of Economic 

Analysis (BEA) concept of economic 

areas and metropolitan statistical 

areas (Dawkins, 2003, pp. 133-134). 

This concept has also infl uenced the 

defi nition of other geographic types by 

Federal agencies, such as the classifi cation of Rural-Urban Commuting Areas 

by the USDA Economic Research 

Service.

20More information on this kind of 

development is available in the ERS 

website (ers.usda.gov) material on rural 

development policy. 
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As with the industrial recruiting approach, each of these other traditional 

development strategies has potential drawbacks. Most notably, they have 

the potential to increase population signifi cantly, which can cause increased 

sprawl, pollution, traffi c congestion, and related problems. To be successful, 

these strategies might pursue other policies aimed at preventing or mitigating 

these problems. 

Nontraditional Approaches

In the fi rst decade of the 2000s, many rural areas—including some places 

that had grown rapidly based on traditional strategies—suffered population 

loss and increased unemployment and poverty rates. This led to a call for 

nontraditional or alternative economic development strategies. Most of these 

strategies emphasize innovation to compete better in the global economy and 

greater collaboration among businesses and between public and private sector 

entities, including encouraging greater use of self-supporting networks. These 

somewhat overlapping nontraditional strategies include promoting small business growth and entrepreneurship, cluster-based development, rural innovation and knowledge-based development, and attracting the creative class, all 

of which require and improve social and human capital.

Small Business Growth and Entrepreneurship

Whereas industrial recruitment generally targets larger businesses, many 

of which compete in the global economy, small businesses are typically 

more tied into the local economy and less vulnerable to global competition. 

Entrepreneurial small business owners—who develop new products or devise 

new services—are considered to be more innovative than other small business owners, with greater growth potential. Small business entrepreneurs 

often live in the communities where their businesses are located, so more of 

the profi ts are retained locally than would be expected from the branch plants 

of larger nationwide or global businesses. These characteristics make this 

strategy conducive to sustainable development and wealth creation (Dabson, 

2005; Drabenstott, 2005). Entrepreneurial development strategies go beyond 

traditional small business assistance approaches by employing venture capital 

(a riskier form of fi nancial capital that involves equity investments in fi rms) 

to help entrepreneurial businesses grow, using entrepreneurial development 

systems (EDS) that promote and empower self-supporting networks of local 

entrepreneurs, and by trying to improve the entrepreneurial culture in the 

community (Edgcomb, 2008, Goetz, Partridge, and Deller, 2009; Macke and 

Markley, 2006). 

Cluster-Based Development

The cluster strategy builds on the economic advantages of collaborative and 

competitive networks of existing local or regional businesses and institutions 

(Porter, 1990; Rosenfeld, 1995; Dawkins, 2003; Woodward and Guimaraes, 

2009; Shields et al., 2009). This approach focuses on clusters of businesses 

related to one or more industries that are thought to have a local comparative 

advantage in the national or global economy. This advantage can be heightened by improving local or regional networks that support the industry and its 

innovation process. This strategy involves two basic steps: the identifi cation 

of the most desirable clusters for the region and the targeting of assistance 
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to those clusters. Rural examples include local food chains in southeastern 

Ohio, carpets in northern Georgia, and aquaculture along the Maine coastline 

(Rosenfeld, 2009, p. 38).

Rural Innovation and Knowledge-Based Development

This approach enlists local educational institutions and research or high-tech 

fi rms in developing innovative products or services that have a better chance 

to compete in the global economy than traditional goods and services. Such 

strategies try to promote greater collaboration between local businesses, 

knowledge/innovation organizations, and local governments. A knowledgebased local economy tends to employ higher skilled workers who make high 

wages, leading to greater local wealth (Drabenstott, 2005; Dabney, 2005). 

In addition, the innovative products can evolve with local educational and 

research support, thus remaining competitive over time and giving rise to 

more sustainable development and wealth. 

Attracting the Creative Class

Unlike the preceding “nontraditional” approaches that foster greater innovation by directly assisting individual entrepreneurs, businesses, or networks 

of businesses and research institutions, the “creative class” strategy aims to 

attract or retain the creative people who are most likely to become entrepreneurs and start or work for such innovative businesses. These people tend 

to be highly educated and skilled. Such individuals often seek particular 

characteristics in communities, such as good schools and natural or cultural 

amenities, so creative class strategies might attempt to improve or promote 

such assets and provide assistance to creative entrepreneurs in starting and 

growing businesses. If successful, these approaches have the potential to 

foster more sustainable growth and wealth creation by increasing the innovative component of local industry, as well as attracting and retaining creative 

class individuals who bring with them higher levels of personal wealth 

(McGranahan and Wojan, 2007; McGranahan et al. 2010b). A good example 

is Grand Marais (Cook County), Minnesota, which has developed various 

community assets—such as a center for the arts, a music association, a playhouse, and an “Art Colony”—and combined these cultural assets with business assistance to entrepreneurs to promote innovative business development 

(McGranahan and Wojan, 2007). 

These represent only a few examples of alternative, nontraditional economic 

development strategies that might lead to greater and more sustainable 

wealth creation. For other examples of new or alternative rural development strategies, see Dabson (2010), Flora and Flora (2004), and Galston and 

Baeler (1995). 

Local Development Strategy Formulation 

How does a locality arrive at a particular strategy that might lead to sustainable development and wealth creation? The traditional approach is to appoint 

or hire an individual to come up with a strategy. While this method can 

work, it also can result in strategies that are narrowly focused, infeasible, 

or lack broad local support. In recent years, rural development experts have 
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increasingly supported two new approaches to strategy formulation: strategic 

planning and research-based industrial targeting.

Strategic Planning 

Also called community visioning, this is a process that ideally engages 

all elements of a community (the rich, the poor, minorities, businesses, 

churches, schools, government entities, nonprofi ts)—often assisted by an 

outside facilitator—in identifying community goals and conceiving a workable development strategy, with specifi c steps to achieve those goals (Green 

and Haines, 2002). This approach, originally employed in the private sector 

after World War II, began to be used for local economic development in the 

1980s. Early efforts to use strategic planning for local development were 

sometimes limited by planning efforts that ignored political realities, organizations that lacked the capacity to undertake strategic planning, and efforts 

that focused too much on process and not enough on outcomes (Blair and 

Reed, 1995). Recent strategic planning approaches have been focused more 

on the idea of “strategic doing” and the action steps a community must take 

to effectively implement the vision of the strategic plan (Hamm and Walzer, 

2010). 

Strategic planning has been used by regional organizations such as the 

Appalachian Regional Commission (ARC) and the Delta Regional Authority 

(DRA), as well as the national Economic Development Administration 

(EDA). Several studies have shown these organizations to have achieved positive economic outcomes (Martin and Graham, 1980; Isserman and Rephann, 

1995; Burchell et al., 1998; Arena et al., 2008; Pender and Reeder, 2011), 

suggesting the value of strategic planning.

Strategic plans are designed to build on local assets, shore up local liabilities 

(where necessary), and exploit or achieve a comparative economic advantage 

that will lead to sustainable development. For example, a community might 

identify an underutilized lake on the outskirts of the county as a community 

asset and an underperforming high school that is producing too few college 

attendees as a community liability. The strategic planning process might 

devise a way to improve access to the lake, leading to lakefront development that produces a windfall of local property tax revenues. These new 

revenues might then be used to fi nance new distance-learning telecommunications facilities and equipment for the high school so it can add science 

and language classes, which could lead to improved school performance and 

greater college attendance. Although such projects might have been feasible 

without strategic planning, the planning process can help to get community 

support behind each project, either one of which might have failed to gain 

traction on a stand-alone basis. In addition, the planning facilitator might 

suggest ways to fi nance the projects, such as through impact fees on the lakeside residences or tax increment fi nancing.21

In addition, strategic planning is dynamic: it gauges success so that strategies can be modifi ed over time. For example, if the lake/school project was 

deemed successful, the community might undertake other amenity-related 

improvements in order to attract higher income residents. 

21Tax increment fi nancing is a 

method to fi nance public investments 

using future increases in tax revenues.
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Research-Based Industrial Targeting

Quantitative methods exist to help identify industries best suited to a local 

community’s economic development strategy. Such methods vary from 

simple to sophisticated and comprehensive.22 The more sophisticated 

methods attempt to ascertain not only the likelihood that the industry might 

fl ourish locally, but also the extent to which the industry fi ts with the community’s goals, which might include providing higher income, more stable jobs, 

or environmental sustainability. Research-based industrial targeting is therefore most useful when combined with some form of strategic planning, which 

identifi es such goals in steering the industrial targeting.

Although research-based industrial targeting efforts date back to the 1980s, 

interest has grown among State and local development offi cials because 

of Porter’s work on cluster analysis (Goetz et al., 2009). This industrial 

targeting/cluster approach requires the use of sophisticated computer models, 

and experts are typically employed to conduct the analysis. However, 

Extension researchers at various land-grant universities have set up models to 

cover various States or regions (e.g., Kansas, Montana, Northeast Wisconsin, 

and the Great Plains), and efforts are underway to implement these models at 

the local level. 

One such effort is the new SET (Stronger Economies Together) initiative, 

begun by USDA’s Rural Development mission area in partnership with 

four regional rural development centers. Under SET, pilot projects were 

initially launched in 23 multi-county regions in 9 States (Arkansas, Arizona, 

Kentucky, Louisiana, Missouri, New Mexico, Ohio, Pennsylvania, and 

West Virginia).23 Under this initiative, university Extension experts conduct 

economic analyses for each region, identifying the regional comparative 

economic advantages and emerging economic clusters. Technical assistance 

and training are provided to the local entities to assist in the process. 

Such regional approaches emphasize collaboration among local governments, businesses, and nonprofi t groups in order to make the most of the 

region’s collective wealth. For example, one community may have established 

a community college, while another may have established a research park 

and business incubator. These resources combined can better help entrepreneurs innovate, with economic benefi ts for both communities in the region. 

This illustrates an important point about wealth—access to wealth can be as 

important as possession of wealth, and collaboration, typically on a regional 

level, is often the key to gaining access to this wealth.24

Wealth Creation Approaches To Combat Poverty

Poverty concerns have been a particular focus of wealth creation efforts. 

Historically, most government policies addressing poverty have aimed at 

providing a minimal level of subsistence, including welfare cash payments, 

low-rent public housing, food stamps, and emergency medical treatment. 

These approaches, though important for the survival of the poor, have been 

criticized for not enabling or encouraging the poor (both individuals and 

communities) to accumulate the wealth needed to raise themselves out of 

poverty (Sherraden, 1991). Poor people and communities are also eligible 

for many economic development programs, such as USDA’s infrastructure, 

22For a good discussion of the various 

methods available, see Goetz et al. 

(2009).

23In 2011, SET was expanded to 

about 20 more regions in 2 more 

States, with plans to cover up to 30 

States over time. 

24Access to wealth is also manifest 

in the availability of Federal or State 

economic development assistance, or 

the availability of assistance from a 

nonprofi t foundation. Key to gaining 

access to such assistance, as well as to 

assistance from neighboring communities within a region, is local leadership 

and planning capabilities, which vary 

greatly from one rural community to 

another.
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housing, and business loan programs, which have more potential for creating 

wealth. Nevertheless, many poor people and communities underutilize these 

programs because of various barriers like incomes insuffi cient to pay off 

loans, even at subsidized interest rates. The poor may also lack a means of 

reliable transportation to get to a job, or be unfamiliar with ways to responsibly manage their money and debt. In addition, local government offi cials 

in poor rural communities are often unaware of available assistance or lack 

the resources to successfully apply. This has led to a number of proposals for 

asset-based welfare policies to address poverty concerns (Sherraden, 1991, 

2000, 2003; Sherraden and McBride, 2010; Saegert et al., 2001). 

Many of these ideas—like capacity building for local governments through 

leadership training—have existed for a long time and apply to all rural communities (Honadle, 1981). In recent years, wealth-based efforts targeted to poor 

communities and individuals have been championed by nonprofi t foundations. 

For example, the Annie E. Casey Foundation has proposed improving access to 

affordable cars for low-income families or providing a manual to help families 

threatened with deportation to protect children’s assets. Individual development 

accounts (IDAs)—in which the poor are provided matching funds by government to save and invest in homes, education, and small businesses—began in 

the early 1990s at the local level. Most States have passed IDA-enabling legislation, such as raising asset limits for welfare recipients (Sherraden, 2000, p. 

3). In addition, fi nancial literacy programs that educate residents or employees 

about ways to reduce debt and increase savings/investments can help the poor 

in both rural and urban areas (Corporation for Enterprise Development, 2011; 

Lopez, 2011; Edmiston et al., 2009).

More comprehensive regional approaches have also promoted wealth creation 

as a means to combat rural poverty. For example, the Appalachian Regional 

Commission (ARC) was created in the 1960s with the idea of helping an 

entire region to escape poverty. The ARC and other more recent regional 

development commissions (such as the Denali Commission and the Delta 

Regional Authority (DRA)) emphasize wealth creation through infrastructure 

improvements (see box, “Regional Development Programs” for a description of these programs). On a national level, the Economic Development 

Administration’s (EDA) programs also target infrastructure improvements 

and apply strategic planning using multi-county planning districts. 

Wealth creation also underpinned another Federal anti-poverty program 

that began in the 1990s but which has since been discontinued. The Federal 

Empowerment Zone/Enterprise Community (EZ/EC) program, available 

only to the poorest urban and rural communities, emphasized many of the 

concepts associated with wealth creation, such as increasing local employment and training, capital access, infrastructure development, environmental 

sustainability, and affordable housing. Applicants were required to conduct 

strategic planning and build on assets in forming a coordinated strategy with 

community-based partnerships. Several evaluations of rural EZ/ECs—and 

the “Champion Communities” that participated in the program but received 

less Federal assistance—found that the program stimulated wealth creation in 

poor rural communities (Aigner et al., 1998; Aigner, 2001; Flora, 2001). 

More recently, the Northwest Area Foundation partnered with university 

Extension programs in Idaho, Iowa, Minnesota, Montana, North Dakota, 
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South Dakota, and Washington in a program called Horizons. The goal is 

to reduce local poverty and increase wealth through locally devised strategies and enhanced social capital. Facilitated community visioning meetings 

are aimed at developing action agendas. Horizons also includes leadership 

training, technical assistance, and the fostering of networks with other local 

and regional entities. The end result is a list of two to fi ve priority action 

areas, along with a list of community volunteers and leaders (social capital) 

to work on each priority (Hoelting, 2010). 

A recent spinoff from this Horizons approach was begun by the Southern 

Rural Development Center (SRDC), with funding support from the Kettering 

Foundation, Farm Foundation, and Everyday Democracy. This Turning 

the Tide on Poverty (TIDE) project created 30 study circles in 5 Southern 

States (Alabama, Georgia, Louisiana, Mississippi, and Oklahoma) to develop 

community action plans to deal with problems leading to poverty, such as 

failing schools and community violence. For this effort, SRDC created a 

study circle guide, adapted to the Southern region, to assist local participants. 

The Ford Foundation has a regional program to promote wealth creation 

in poor rural communities, which was launched in 2008 and is supporting 

projects in rural Appalachia, the deep South, and the Rio Grande Valley. 

Regional Development Programs

The Appalachian Development Commission (ARC) and the Economic 

Development Administration (EDA) got their start in the 1960s. Both employed 

multi-county regional planning entities that established local plans and received 

Federal support to implement those plans. Both emphasized investments in 

infrastructure, but they have also fi nanced other kinds of projects fi tting into 

local strategic plans. And both were meant to target investments to distressed 

areas, though the latter was a national program while the former focused only 

on the Appalachian region. 

Around 2000, two new regional development programs were created. The 

Denali Commission, authorized in 1998, focused on remote communities 

in Alaska and emphasized infrastructure such as power generation and 

transmission facilities, advanced telecommunications, water and sewer 

systems, and health care facilities. The Delta Regional Authority, established 

in the early 2000s, focused on the multi-state region along the lower half of the 

Mississippi Delta. The DRA also had a focus on infrastructure, and like the 

ARC and EDA, made use of multi-county districts to do strategic planning for 

its federally supported projects. 

The 2008 Food, Conservation, and Energy Act (PL 110-246) authorized the 

creation of several additional regional development programs: the Northern 

Border, the Southeast Crescent, the Northern Great Plains Regional Authority, 

and the Southwest Border Commissions, all patterned on the ARC model. To 

date, of these new regional entities, only the Northern Border Commission has 

had a Federal Chair appointed and confi rmed.

For more information on these regional developments, including research 

assessing their economic impacts, see Pender and Reeder (2011). 
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Ford’s approach emphasizes a fl exible demand-driven approach to identifying 

wealth creation opportunities, focusing on promoting local wealth creation 

“that sticks” and is linked to particular value chains such as those associated 

with local and regional food systems, community forestry, and others. It asks 

grantees to measure impacts of projects on seven forms of wealth, including 

intellectual, social, built (physical), natural, individual (human), political, and 

fi nancial capital. 
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Why Measure Wealth Indicators?

Arguments exist both for and against measuring wealth indicators, given that 

many other indicators of rural development inputs, outputs, and outcomes 

are already commonly available. Measuring wealth can help diagnose areas 

for improvement and monitor and assess the impacts of wealth creation 

programs. However, in some cases, the diffi culty and costs of measuring 

wealth indicators may outweigh the value of the information obtained.

General Purposes of Indicators

Before measuring indicators of wealth, it is important to consider the 

purposes for which such indicators will be used. There are many possible 

uses for indicators.

Identifying and diagnosing problems or opportunities. Indicators can be 

used to track general changes in conditions over time, to identify emerging 

problems or opportunities as they arise, and to track progress in addressing 

problems or pursuing new opportunities. A good example of tracking changes 

in wealth conditions is indicators of farm households’ fi nancial well-being as 

derived from USDA’s Agricultural Resource Management Survey (ARMS) 

(Park et al., 2010). As another example, the World Bank has attempted to 

measure “genuine national savings,” taking into account the value of investments in human and natural capital as well as physical and fi nancial assets 

(World Bank, 2006, 2011). Such efforts could be adapted to measure wealth 

at the community, State, or regional level, although many types of wealth can 

only be measured using existing public data sources at larger scales. 

Deciding where and how to target interventions. Indicators of wealth can 

help to identify which programs and projects are best suited to particular 

places or circumstances and how best to target these interventions. For 

example, indicators of income, unemployment, and other local economic 

conditions are used to identify distressed counties where some rural development programs focus their efforts. Indicators of wealth could similarly 

identify places where the need or potential for wealth creation is greatest. 

However, such indicators would need to be available at as small a geographic 

scale as possible.

Improving the design of interventions. Wealth indicators can help in 

the program or policy design process by clarifying the program theory 

and hypothesized impact pathways, leading to better chances of success 

(Douthwaite et al., 2003). Thinking through the potential impacts of wealth 

creation and how to facilitate that may be as important as measuring these 

impacts. Interventions that intentionally seek to create multiple forms of 

wealth benefi t from measures that focus resource allocation, provide ongoing 

feedback on effectiveness, and produce accountability, but only if measures 

are integral to the design and intervention process (Ratner, 2010). 

Monitoring the implementation and performance of interventions. 

Indicators of program or project inputs and outputs are typically available in project accounting and monitoring systems and useful in assessing 

performance. Some of these are indicators of wealth, such as the amount of 
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physical infrastructure constructed. Also important but less commonly available are indicators of outcomes—such as changes in health status, environmental quality, or asset distribution—that are affected by many factors other 

than the intervention. 

Assessing the impacts of specifi c interventions. One cannot observe what 

would have occurred in the absence of the intervention, and wealth indicators by themselves cannot address this attribution challenge (Imbens and 

Wooldridge, 2009). Wealth indicators can be useful in helping to select a 

comparison group that is similar to the participant group at the outset of an 

intervention and tracking relative changes in outcomes. 

Specifi c Reasons To Measure Wealth Indicators

Marketable wealth can provide people with economic opportunities and 

resilience in the face of low or uncertain fl ows of income, and this is not 

refl ected in income measures. Therefore, wealth indicators assess benefi ts 

not measured by fl ow indicators. As such, marketable wealth is a minimum 

wealth indicator that should be measured. 

Funds from an intervention may be allocated toward projects that increase 

wealth, but with unobservable outcomes (by traditional measures). For 

example, building a water treatment facility will result in cleaner water, 

which improves the health and well-being of people in the community, but 

this benefi t may not be refl ected in changes in income. Measurements of 

the physical capital produced (the treatment facility), the human capital 

(improved health status, increased net migration), and natural capital 

(increased water quality) that this project contributes to will better demonstrate its success. This reason is relevant for performance monitoring and 

impact evaluation of interventions.

It may be diffi cult to attribute a change in wealth outcomes to a new investment because the causal links are uncertain. For example, a new school is 

built and the community’s population increases notably over the next 10 

years. To what extent did the improved school facilities attract new immigrants? This attribution problem may be addressed in part by measuring 

changes in the stock of human capital the new school provides to the 

community (e.g., educational attainment of the children) and using statistical 

methods to demonstrate that this form of wealth helps attract new residents. 

Reasons Not To Measure Wealth Indicators

It may not always be necessary or cost effective to measure wealth or all of its 

components. In some cases, the concept of wealth being considered is diffi -

cult to defi ne or measure precisely, while the relevant outcomes may be more 

obvious. For example, an important aspect of social capital may be the ability 

of communities to plan, coordinate, and implement development projects at 

a regional level. However, defi ning and measuring this aptitude or endowment may be diffi cult. If the main concern is with assessing the outcomes of 

investments and not with understanding the factors that contributed to their 

successful implementation, measuring social capital may not be necessary.
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Ultimately, the selection of which indicators to measure will depend upon 

local values. For example, a Native American community may wish to 

emphasize measures of cultural wealth and continuity. Communities of any 

type may use a strategic planning process to arrive at the wealth indicators they most value. Indicator selection will also depend on the development strategies being pursued in a community or region, such as promoting 

manufacturing, exploiting natural resources, or pursuing amenity-based 

development. 
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How Can Rural Wealth Creation 

Be Measured?

In this section, we fi rst discuss a few prominent efforts to measure comprehensive wealth at a national level using a single monetary indicator, arguing 

that measuring a single value of comprehensive wealth in rural areas is 

neither advisable nor feasible. Different wealth indicators and methods of 

measuring them are likely needed for different purposes. For example, to 

target a wealth creation program at rural communities with low levels of, 

say, human capital, an indicator of that type of wealth should be selected that 

is readily available for rural regions and counties across the Nation. On the 

other hand, if the purpose is to assess a program, wealth indicators should be 

selected that relate to the program’s desired outcomes and are measurable in 

places where the program was implemented. Stakeholders, policymakers, and 

program staff need to identify the set of indicators and methods that best suits 

their own purposes. 

A selected set of indicators should accurately capture the relevant types of 

wealth over appropriate timeframes.25 However, measurable wealth indicators 

are in most cases imperfect proxies for the concepts they seek to measure. 

Single indicators rarely refl ect the entirety of a wealth concept or form of 

capital (see box, “Defi nitions of Types of Wealth”). Thus, sets of multiple 

indicators are likely necessary to refl ect the nature of particular types of 

capital and to capture the multiple types of capital that make up comprehensive wealth. Qualitative and subjective indicators may be needed since not all 

aspects of wealth are objectively and quantitatively measurable (cultural or 

political capital, for example). 

Also uncertain is how to measure community outcomes that result from 

wealth creation. After all, accumulating wealth is a worthy goal only 

insofar as it allows individuals, communities, and regions to achieve their 

goals. There is a large body of existing work on outcome measurement. For 

example, the North Central Regional Center for Rural Development has 

published a workbook that helps communities to determine outcomes and 

develop metrics to assess progress (Flora et al., 1999). 

We focus here on measures and indicators of wealth, recognizing that the 

outcomes of interest may differ depending on the people, institutions, and 

organizations that are seeking to increase wealth at different geographic 

scales. For clarity, we organize wealth indicators by three sets of purposes, 

each with a particular set of methods and data:

1. Identifying and diagnosing problems and opportunities, and deciding 

where and how to target interventions; 

2. Improving the design of interventions and monitoring their implementation and performance; and

3. Assessing the impacts of interventions.

25Some policies or programs may 

affect wealth over different periods 

of time. For example, constructing a 

school in a rural community will, by 

defi nition, immediately increase the 

stock of physical capital available to 

the community. Over a period of years, 

the new school may increase educational attainment and/or the quality 

of education that, in turn, leads to an 

increase in the community’s stock of 

human capital. Numerous empirical 

studies show how human capital can 

affect desired outcomes. For example, 

Henry et al. (2004) found that high 

initial stocks of human capital in 1970 

increased annual growth rates in per 

capita income for counties in the South. 
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Identifi cation, Diagnosis, and Targeting

To diagnose problems and opportunities and target interventions in rural 

communities, indicators of wealth and outcomes are needed. But should a 

single aggregate wealth indicator be used, or a set of different indicators? 

If all forms of wealth were readily measurable in value terms and could be 

easily substituted for each other, a single measure of the value of wealth 

would be both simple and refl ect aggregate well-being, as proven by Arrow et 

al. (2010).26 However, developing such a measure presents numerous conceptual and practical problems. 

Aggregate Measures of Comprehensive Wealth

There have been no efforts to estimate a single aggregate measure of 

comprehensive wealth for rural areas of the United States. However, the 

World Bank (2006, 2011) has estimated the value of national wealth for 120 

countries, considering total wealth and the value of natural, produced, and 

“intangible capital.” The World Bank estimated the value of total wealth 

as the net present value of sustainable consumption, assuming that future 

consumption will grow at a constant rate, using consumption and savings 

data.27 Produced capital was estimated using historical investment data from 

national income and product accounts, using the perpetual inventory method 

(PIM).28 The value of natural capital was estimated as the net present value 

of future resource rents, using data on current resource rents of different 

types of natural capital and assumptions about the future growth of these 

rents. Intangible capital was estimated as total wealth minus produced and 

natural capital. 

The World Bank’s approach in estimating comprehensive wealth may 

be useful at the national level, but it relies on data (such as estimates of 

consumption) that are not readily available at a local or regional (rural) 

level in the United States. It also relies on many stringent and questionable 

assumptions—that production is deterministic and involves constant returns 

to scale, that a perfect credit market exists with a constant real interest rate, 

that all people have identical preferences, and that future resource rents grow 

at a known constant rate. This approach also combines wealth estimates 

based on inconsistent methods; for example, the value of produced capital 

is considered to be the sum of the depreciated value of past investments, 

while the value of natural capital is estimated as the net present value of 

future rents. Some scholars have criticized the PIM method for estimating 

the value of the public capital stock because public investment spending 

may not translate wholly into productive public capital due to problems such 

as government ineffi ciency (Pritchett, 2000). Uncertainty and ineffi ciency 

could also imply divergence between the cost of cumulated private investments and the net present value of future profi ts that result.29 Furthermore, 

estimating total wealth as the net present value of future consumption 

ignores the value of nonmarketed goods and services, such as amenities 

provided by natural, human, and social capital.30

Arrow et al. (2010) estimated the value of comprehensive wealth and changes 

in wealth for fi ve countries, including the United States. They estimated the 

value of natural, produced, and human capital and changes in these assets, 

based on estimates of stocks and shadow prices of each asset type. The value 

26This issue relates to the debate in 

the sustainable development literature between advocates of “strong” 

vs. “weak” sustainability perspectives (Stiglitz et al., 2009). The weak 

sustainability perspective assumes that 

many possibilities exist for substituting 

among different types of assets, so that 

what matters for sustainable development is the aggregate value of wealth 

of all types, rather than individual asset 

types. From this perspective, depletion of natural capital stocks is not 

necessarily unsustainable, as long as 

suffi cient investment in other forms of 

capital occurs (e.g., Hartwick, 1977). 

Advocates of a strong sustainability 

perspective argue that substitution 

possibilities face physical limits, 

especially for natural capital stocks 

providing basic life-support functions. 

For such stocks, critical minimum 

thresholds may be necessary to 

maintain environmental resilience and 

human well-being (Stiglitz et al., 2009).

27Hamilton and Hartwick (2005) 

proved that the value of current wealth 

is equal to the net present value of 

future consumption in a deterministic 

optimal growth model including an 

exhaustible resource and producible capital, constant returns to scale 

production technology, and a perfect 

credit market. If the real market interest 

rate does not change over time, this 

model implies that consumption grows 

at a constant rate and that wealth is 

equal to current consumption multiplied 

by a factor that depends in general on 

the interest rate and people’s preference 

parameters. Under certain simplifying 

assumptions (i.e., the elasticity of 

marginal utility of all individuals equals 

1, and all people have the same pure 

rate of time preference), this factor 

depends only on the rate of time preference, and total wealth can be estimated 

based on current consumption and 

an estimate of the rate of time preference (World Bank, 2006, p. 144). The 

World Bank used average per capita 

consumption over 3 years for current 

consumption to address the volatility 

of consumption, adjusted consumption 

downward for countries having negative rates of adjusted net saving (i.e., 

savings rates were adjusted to account 

for depletion of natural resources), and 

assumed the pure rate of time preference is 1.5 percent.
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of human capital was estimated as the value of education and health. The 

value of education was estimated using an assumed rate of return to human 

capital investment (8.5 percent), the average wage level in each country, and 

the level of educational attainment. The shadow price of health was estimated using estimates from the literature on the value of a statistical life, 

and combined with data on age distribution and mortality to estimate the 

national value of health. The value of oil, natural gas, and mineral resources 

was estimated as the difference between the market price and per-unit extraction costs, multiplied by proven reserves. The commercial value of forest 

resources was estimated similarly, although Arrow et al. also included estimates of the wealth due to non-timber forest benefi ts, such as recreation, 

erosion control, water fi ltration, and habitat service, using estimates of the 

World Bank (2006). They also included the value of non-urban land as estimated by the World Bank. They used a similar approach as the World Bank 

to estimate the value of produced capital, except that they account for the net 

ownership of these assets with respect to the rest of the world.31 In estimating 

changes in wealth, Arrow et al. incorporated the effects of population and 

total factor productivity growth, transnational externalities (due to greenhouse gas emissions), and capital gains on nonrenewable resource stocks. 

Remarkably, their measure of comprehensive wealth was dominated by the 

estimated value of health capital, which accounted for more than 90 percent 

of comprehensive wealth in all countries.

The approach of Arrow et al. (2010) has some advantages over the World 

Bank’s approach. It does not rely on the stringent assumptions or consumption data needed by the World Bank to estimate total wealth, instead estimating comprehensive wealth based on estimates for particular types of 

assets. Their estimates of human capital wealth are innovative and, since they 

fi nd that this type of wealth is the dominant form in terms of value, signifi -

cant. Their approach appears more feasible to adapt and use for measuring 

wealth in rural areas of the United States than the World Bank’s approach, 

since their estimates are based on shadow prices multiplied by wealth stocks. 

To the extent that shadow prices for particular assets are similar across U.S. 

regions (which may not be the case, however), national estimates of shadow 

prices (or estimates adapted to different regions based on available literature 

and data) could be used in estimating regional or local wealth, combined with 

data on local stocks of assets. Their fi nding that human capital is the dominant form of wealth suggests that a critical fi rst step to measuring the value 

of rural wealth would be to value the human capital in rural areas, which 

could be based upon indicators of human capital (e.g., educational attainment, 

mortality, and life expectancy rates) that are readily available for local units 

from the Population Census, the American Community Survey, and other 

data sources (see appendix C).

However, many types of assets are not included in the Arrow et al. measure 

of comprehensive wealth, including social capital, political capital, and 

cultural capital. Arrow et al. (2010) expressed concern over the dominance 

of health capital in their estimates and whether this fi nding was theoretically and empirically robust. They also cited concerns about the limitations 

of available data; aggregation of various kinds of consumption and capital 

goods, which may cause biases of unknown magnitude; and the application of concepts such as the value of a statistical life across widely differing 

countries.

31The World Bank’s most recent 

wealth estimates (World Bank, 2011) 

also account for net holdings of 

produced capital.

28The PIM estimates the value of a 

capital stock as the depreciated cumulated value of past investments, using 

the equation: 

 ,

where Kt is the capital stock in year 

t, It-i is the real value of investment in 

year t-i, and α is the rate of depreciation 

(World Bank, 2006).

29Even without uncertainty or ineffi ciency, there is no reason that the 

total costs of investments should equal 

the net present value of the benefi ts of 

investments. In general, without uncertainty, effi cient investors will only invest 

in projects whose net present value of 

future returns is at least as large as the 

cost of investment. Hence the value 

of wealth estimated using cumulated 

investment costs could be expected to 

be less than the value estimated using 

the net present value of future returns, 

without uncertainty and with effi cient 

investment.

30The World Bank’s estimates of 

the value of natural capital include an 

estimate of the net present value of 

non-marketed forest benefi ts such as 

minor forest products, hunting, recreation, watershed protection, and option/

existence values, based on a estimates 

provided in the literature (World Bank 

2006, p. 151) and the opportunity costs 

of land in protected areas. However, the 

World Bank’s total wealth estimates do 

not include these values, since they are 

based on the value of consumption.
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The approach of Arrow et al. has other weaknesses too. Estimating 

shadow prices of assets can be quite diffi cult, requires numerous assumptions, and is diffi cult to validate. In a wide-ranging review of methods for 

measuring sustainability, the Commission on the Measurement of Economic 

Performance and Social Progress (CMEPSP) argued that when market failures cause observed prices to lose their informative power about the shadow 

values of assets, “the quantifi cation of sustainability cannot proceed without 

explicit predictions of future economic and environmental trajectories, and 

without some explicit normative choices about values to be attached to such 

or such kind of trajectories” (Stiglitz et al., 2009, p. 234). In other words, one 

needs to model the future and make normative choices about what is to be 

sustained and for whom in order to estimate the social value of assets. This 

criticism applies also to the World Bank’s approach or any other approach to 

estimating an aggregate measure of the value of comprehensive wealth. 

Given the shortcomings seemingly inherent in measuring an aggregate value 

of comprehensive wealth, an approach that does not rely on a single indicator 

seems warranted. After considering the options for measuring sustainability 

and their strengths and weaknesses, the CMEPSP recommended using a 

“dashboard of indicators,”32 including separate indicators of quantity and 

quality for several types of assets (Stiglitz et al., 2009). The Commission 

suggested focusing monetary aggregation on assets for which reasonable 

valuation techniques exist and among which substitutions are possible; and 

combining this with physical indicators for other items that are more diffi cult 

to value and less substitutable, such as environmental indicators. An argument could be made to include in the dashboard indicators of other types 

of assets that are also not readily measured in value terms, such as social, 

political, and cultural capital.

Measuring a Set of Wealth Indicators

There have been few efforts to defi ne and measure a set of wealth indicators 

covering rural communities of the United States. The Federal Reserve Bank 

of Kansas City (FRBKC) has developed regional indicators of several types 

of assets using publicly available county-level data, including indicators of 

bank deposit depth and evolution (Low, 2005a), household fi nancial assets 

(Low, 2005b), entrepreneurship (Low, 2004), surplus skills (Moore, 2005), 

innovation, the creative workforce, human amenities (such as access to health 

care, recreation, restaurants, and scenic amenities), and infrastructure.33 The 

FRBKC has mapped each of these indicators for a specifi c time period, but 

changes over time have not been mapped in most cases. In some cases, proxy 

variables were used to indicate wealth. For example, Low (2005b) provides 

three indicators of household fi nancial wealth: median home values; the 

mean value of agricultural land; and interest, dividend, and rental income. 

Interest, dividend, and rental income is not an asset value, but rather income 

earned from assets, and therefore may be a reasonable proxy for the value of 

the assets that generate this income. 

The Ford Foundation has supported development of wealth indicators for 

selected rural areas. In one study, Hoffer and Levy (2010) proposed, for 14 

counties in eastern Kentucky, indicators of 6 types of community capital: 

individual (the stock of healthy weight people), social (the stock of residents 

with broadband availability and access), intellectual (the stock of patents 

32Drawing an analogy to the dashboard of a car, CMEPSP argued that 

“a meter that added up in one single 

number the current speed of the vehicle 

and the remaining level of gasoline 

would not be of any help to the driver” 

(Stiglitz et al., 2009, p. 17).

33All of these indicators are documented at: www.kansascityfed.

org/publications/research/mse/

regional-asset-indicators.cfm
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in use), built (stock of electric generation capacity), fi nancial (the stock of 

fi nancial assets and liabilities), and natural (the stock of agricultural land and 

food produced for local consumption). For some indicators, county-level data 

were not available (e.g., fi nancial assets and liabilities), so Hoffer and Levy 

used related indicators that were available at the county level (e.g., median 

household income and median home value). Some of the indicators seem 

tenuously related to the concept they are meant to refl ect (e.g., broadband 

access as an indicator of social capital), or are questionable indicators in the 

context of rural Kentucky (e.g., patents as an indicator of intellectual capital). 

Nevertheless, many of these rural wealth indicators could be useful for 

specifi c purposes, and most are based on publicly available data.

Various studies have constructed indicators of particular types of capital at 

different scales. For example, Rupasingha et al. (2006) used county-level data 

on the number of membership organizations of different types, the percentage 

of voters who voted in presidential elections, the county-level response rate 

to the decennial population census, and the number of tax-exempt nonprofi t 

organizations to construct an index of social capital. Many studies on the 

political determinants of Federal spending and economic performance have 

constructed indicators of political capital at the State or Congressional district 

level—such as the share of voters who participated in past elections, the 

seniority and leadership positions held by Members of Congress, whether 

Members of Congress are part of the majority party, and the percent of 

the vote carried by Members of Congress in past elections (e.g., Levitt and 

Poterba, 1999; Besley and Case, 2003; Lee, 2003; Hoover and Pecorino, 

2005; Knight, 2005; Rupasingha and Goetz, 2007).

These efforts could serve as a springboard toward developing a dashboard 

of rural wealth indicators. Appendix C lists indicators of different types 

of assets, indicating publicly available data sources that could be used to 

construct them and the smallest geographic unit and time period for which 

such data are available. We focus on indicators that can be constructed using 

public data available for all of the United States. For wealth creation efforts 

at the regional, State, and community levels, these indicators may be supplemented by more localized data from primary sources, such as administrative 

records or survey results. For example, a proposed community development 

strategy may require improvements in a community’s level of social capital. 

Secondary data on the number and size of charitable contributions could be 

supplemented by a community survey designed to assess the connectedness 

among residents.34 The geographic scale of the indicators used will depend 

on what stakeholders require. 

Some indicators can be estimated using publicly available data for all eight 

asset types in our conceptual framework (appendix C), although the ability to 

construct local indicators varies widely across asset types. For example, indicators of many different aspects of physical, natural, and human capital can 

be constructed for local geographic units such as counties, ZIP Code areas, 

census tracts, school districts, or other units. Fewer indicators of fi nancial, 

intellectual, social, political, or cultural capital can be estimated for local 

units using public data. In part, this refl ects the historical emphasis of government agencies on collecting particular types of data needed to carry out their 

mission, such as collection of geographically explicit data on highways by 

the U.S. Department of Transportation, on land and soil quality by USDA, on 

34See the Social Capital Community 

Benchmark Survey at www.cfsv.org/

communitysurvey/ for an example.
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air quality by the U.S. Environmental Protection Agency (EPA), on mineral 

resources by the U.S. Geological Survey (USGS), on population and demographic characteristics by the Census Bureau, and on school quality by the 

National Center for Education Statistics (NCES). It may also refl ect diffi culties in conceptualizing and using indicators of less tangible aspects of wealth, 

like social capital.

The feasibility of constructing indicators for particular characteristics varies 

widely within asset types as well. For example, data on access to various 

types of physical infrastructure—such as highways, broadband, and water 

and sewer systems—and on the value of residential houses are available at a 

detailed geographic level. However, data on the physical assets of businesses 

or of households (other than houses) are generally available only at higher 

geographical scales, such as metropolitan areas or States. In most cases, the 

sources of information on these assets are sample surveys designed to be 

representative only at a national or regional level. Confi dentiality concerns 

also limit the ability of government agencies to provide data on business 

assets for smaller geographic units.

In some cases, allocation and imputation methods could be used to estimate 

assets at a more local level. For example, Munnell (1990) used the U.S. 

Department of Commerce Bureau of Economic Analysis (BEA) estimates of 

private physical capital stocks at the national level for major industries and 

allocated these across States based upon each State’s share of certain proxy 

variables for capital stock in major industries.35 Garofalo and Yamarik (2002) 

estimated State-level private capital stocks by apportioning the national 

capital stock for each major industry to States based on the share of income 

earned by each industry in each State. A similar approach could be used 

to estimate private capital stock at the county level, based on the county’s 

share of earnings or employment by industry using BEA county-level data on 

earnings and employment.36 This assumes that capital-earnings or capitalemployment ratios are similar within industries across counties. County-level 

variations in these relationships, as well as missing or undisclosed data on 

earnings and employment for particular industries at the county level, would 

pose estimation problems.

In some cases, asset values could be estimated from publicly available data on 

the fl ow of investments. For example, the value of the public physical capital 

stock could be estimated using data on public investments at the county level 

and the perpetual inventory method. This is the method used by BEA to 

estimate national public and private physical capital stocks (BEA 2003) and 

used by numerous researchers to estimate public capital stocks at the State 

or metropolitan level (e.g., Munnell, 1990; Garcia-Mila and McGuire, 1992; 

Holtz-Eakin, 1993; Baltagi and Pinnoi, 1995; Crihfi eld and Panggabean, 

1995; Beemiller, 1999). 

The quality of available data on public expenditures within local jurisdictions 

would need to be carefully assessed before using this approach to estimate 

local public capital stocks. For example, the Consolidated Federal Funds 

Report (CFFR) of the Census Bureau provides annual data on all categories 

of Federal expenditures by county, based on reports from all Federal agencies. However, the quality of these data varies substantially across agencies and programs. A 2006 review by the U.S. Government Accountability 

35Munnell (1990) allocated the 

national stock of private capital in the 

agricultural sector to States according 

to each State’s share of the value of 

land, buildings, and equipment in 

agriculture, using data from the Census 

of Agriculture. For the manufacturing 

and construction sectors, the national 

stock of private capital was allocated to 

States based on each State’s share of the 

gross book value of depreciable assets 

taken from the Census of Manufacturers 

and Census of Construction. For other 

sectors, the State’s share in value of 

production, sales, banking deposits, or 

other proxies was used. 

36This approach is used by the 

IMPLAN group to estimate investment 

by county (Douglas Olson, personal 

communication).
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Offi ce (GAO) of the quality of census data on Federal economic development grant programs found “signifi cant problems with agencies’ reporting 

of their program obligation data” (GAO, 2006, p. 4). GAO cited the inability 

of the Census Bureau to ensure that agencies submit data, lack of knowledge 

among program offi cials of data reporting requirements, and poor oversight 

and coordination at the agencies as major reasons for these data quality problems. In addition, it can be diffi cult to allocate program investments to local 

jurisdictions. For example, funds for many programs such as block grants 

go directly to State capitals or regional centers that redistribute money to 

local areas; often such funds are reported as received by the State capital or 

regional center rather than the local jurisdictions where the investments actually occurred.37

Of course, the quality of any of the data sources cited in appendix C must 

be considered when considering whether and how to use indicators based 

on these data. In general, data that are based on census information, such 

as many indicators of human capital, are likely to be more reliable for local 

geographic units than estimates based on sample surveys since they are less 

subject to sampling error.38

There is often a tradeoff between the quality or local specifi city of data 

and its timeliness. For example, data collected by the decennial Population 

Census have zero or low sampling error and are available for small 

geographic units, such as census tracts, but are only available at 10-year intervals. More timely information on the population and its demographic characteristics is available from surveys such as the ACS or Current Population 

Survey, but the ability of these surveys to represent smaller geographic units 

is more limited.

Another issue related to developing indicators of wealth is the distinction 

between the location of the assets and that of the assets’ owners (see box, 

“Measuring the Wealth Located in a Region Versus the Wealth Owned by 

Residents of the Region”). For human capital, the assets are bound to their 

owner. For most assets, however, the location of the owners of the asset may 

be different from the location of the asset itself. For example, the mineral 

resources of a county may be vast, but if mineral deposits are owned mainly 

by people who live outside of the county, the mineral wealth owned by 

county residents may be much smaller. Both concepts of wealth (by location of the assets or by residence of the owners of the assets) can be useful. 

Unfortunately, data on local ownership of assets are generally not available, so measuring the local assets owned by local residents in rural areas is 

diffi cult.

Improving Design and Monitoring Interventions

Indicators of wealth creation and the outcomes resulting from it are also 

needed to improve the design of rural development interventions and to 

monitor their performance. A logic model—a model of how a program 

will achieve its objectives—is especially helpful in linking program inputs, 

outputs, and outcomes (McLaughlin and Jordan, 1999). Such models are 

used frequently in the planning and sometimes evaluation stages of economic 

development programs. For example, Cranwell Schmidt et al. (2006) use 

a logic model to show the theorized connection between program inputs, 

37For further discussion of this and 

other quality issues related to Federal 

funds data, see the ERS’ research on 

Federal funds data: www.ers.usda.gov/ 

38Much of the data published by the 

Census Bureau from prior population 

censuses was based on the census long 

form, which was administered with a 

large sample, but not the full population of the United States, and thus is 

subject to some sampling error. The 

census long form was discontinued 

after the 2000 Population Census and 

has been replaced by the American 

Community Survey (ACS), which 

collects similar information but annually and for a smaller sample. As such, 

the ACS data are published annually 

only for counties with a population of 

65,000 or more. For counties with a 

population of 20,000 to 65,000, 3-year 

moving average estimates are available 

starting with 2005-07. For counties with 

a population of less than 20,000, 5-year 

moving average estimates are available 

starting with 2005-09.
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activities, outputs, and immediate and long-term impacts of Vermont’s 

Micro Business Development Program. The logic model provided guidance 

in selecting indicators of key program outputs and outcomes, such as the 

number of sources of capital accessed, the number of positive attitude gains 

among participants, overall satisfaction with services, the change in household income, and changes in receipt of Temporary Assistance for Needy 

Families (TANF) and/or unemployment benefi ts.

The difference between where assets are reported or located 

and where the owners of assets reside raises a key conceptual 

issue with regard to measurement of wealth in a particular 

region. Is the goal to measure the wealth that is physically 

located within the region or to measure the wealth owned 

by the residents of the region? This difference is analogous 

to the difference between the concept of Gross Domestic 

Product (GDP), which measures the value of goods and services produced by labor and property located within a nation or region, and Gross National Product (GNP), which 

measures the value of goods and services produced by labor 

and property supplied by the residents of a nation or region. 

The fi rst concept – wealth located physically within the region – does not include the value of fi nancial assets because, 

for the most part, such assets do not exist in physical form 

(except for currency) and are not tied to a particular location. The second concept – wealth owned by residents of 

the region – does include fi nancial assets and liabilities (as 

well as other assets and liabilities) owned by residents of 

the region, regardless of whether they are physically located 

in the region or whether they exist in physical form at all. 

Financial assets owned by some residents that are claims 

against liabilities held by other residents of the same region 

do not add to the net worth of the regions’ residents as a 

whole; only assets net of liabilities with people outside of 

the region affect the total net worth of the regions’ residents. 

This second concept excludes physical and other assets that 

may be located in a region but whose owners reside elsewhere. Thus, depending on which wealth concept is to be 

measured, it may or may not be necessary to measure fi nancial assets or identify the shares of all assets and liabilities 

owned by residents of the region of interest. 

For a closed economy (such as the world as a whole), there 

will be no difference between these two concepts of regional 

wealth, since all assets and liabilities located within the region will be owned by residents of the region. For a wealthy 

country such as the United States, the share of assets and 

liabilities that are with other countries may also be relatively 

small compared to the total, so differences between these 

concepts may not be that large in relation to the scale of 

the economy. However, for small open economies, such as 

counties or regions within the United States, the differences 

between these concepts may be large and important. For 

example, coal-producing counties in Appalachia may have 

large stocks of wealth per capita, considering the wealth located within those counties. However, the per capitastocks 

of wealth owned by county residents may be much smaller, 

since much of the coal is not owned by residents of these 

counties. Nevertheless, since county residents benefi t economically from coal mining jobs, the coal rights owned by 

absentee owners are relevant to the economic well-being of 

local residents, even if this wealth is not locally owned. In 

fact, local residents may prefer more rapid depletion of the 

coal resource than if they were owners of it, since they benefi t directly and in the near term from depletion (abstracting 

from the social and environmental costs associated with 

mining) and may discount the cost of declining resource 

wealth that they do not own. 

Both concepts of regional wealth may be relevant to local 

decisionmakers, and comparing changes in measures of 

these concepts may yield valuable information. For example, the residents of a coal mining (or other naturalresource-dependent) community may be getting wealthier as 

a result of income and savings resulting from exploiting the 

resource, while the total value of assets located within the 

community is declining. Finding such a pattern of changes 

in wealth would suggest that the increasing wealth of community residents may not be sustainable, unless they are investing suffi ciently in other assets that will yield at least as 

great a return as coal mining in the long run. If such productive investments are occurring and helping to diversify the 

local economy, there may be no need for concern (from the 

local policymakers’ perspective, and still abstracting from 

the social and environmental costs of mining) even though 

local resources are being depleted. 

Measuring the Wealth Located in a Region Versus 

the Wealth Owned by Residents of the Region
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Two examples show how coordinated efforts to develop and foster entrepreneurship in rural communities and regions can be evaluated by using wealth 

indicators. The Appalachian Regional Commission’s (ARC) Entrepreneurship 

Initiative invested $43 million in communities from 1997 to 2005 to 

“increase the number of entrepreneurs establishing businesses in the region, 

to increase the survival rate of such ventures, and to increase the proportion that develop into high growth businesses that create jobs and wealth in 

Appalachia” (Markley et al., 2008). The metrics used to evaluate this initiative fell under fi ve categories: capital access, sectors, incubators, entrepreneurship education, and technical assistance. Output and outcome indicators 

for each broad category mainly involved primary or administrative data from 

the program. Increased access to fi nancial capital was a key part of the entrepreneurship program and the efforts made to provide this funding represented 

an increase in the fi nancial capital available to the entrepreneur and the 

community. Markley et al.’s (2008) evaluation used the number and amount 

of funds loaned, the average loan size, and the sectoral distribution of loans 

as indicators of capital access.

The Ford Foundation’s Rural Entrepreneurship Development program, 

started in 2008, began with a wealth creation framework and “triple bottom 

line” approach in mind.39 In a preliminary report describing 17 entrepreneurship “interventions” in rural communities, Stark and Markley (2008) 

report the goals of each project; how each is expected to affect economic, 

environmental, and social outcomes; and how each project is expected to 

build intellectual, social, individual, natural, built, and fi nancial capital. 

For example, an intervention in central Louisiana, called the Cenla 

Entrepreneurial League System (Stark and Markley, 2008, pp. 19-20), offers 

skill assessment and training for entrepreneurs. While the potential effects 

of this program on natural and built capital are unclear, the effects on intellectual, social, and individual capital are readily apparent. By increasing 

the knowledge and skills of each participating entrepreneur, the program 

is likely to increase intellectual capital. Social capital is likely to increase, 

too, as entrepreneurs, coaches, and public offi cials are brought together to 

achieve common goals. As the business assets available to the participating 

entrepreneurs increase, so does individual capital, called human capital 

in our conceptual framework. Although none are proposed in the report, 

a series of indicators could be developed to help determine the program’s 

effect on wealth, with the data most likely coming from primary sources 

such as a survey of program participants.

The Ford Foundation is currently promoting the identifi cation and use of 

wealth indicators for seven types of capital (individual, social, intellectual, 

natural, built, fi nancial, and political) using a wealth matrix, which asks 

grant recipients to develop indicators, measures, and baseline conditions for 

each type of capital. Yellow Wood Associates and Markley (2010) provide 

an example of a completed wealth matrix for a project promoting sustainably 

harvested wood products.

One way to combine logic models and indicator selection comes from the 

international development literature. Impact pathway evaluation (IPE) posits 

ways that a program could affect a variety of outcomes, while considering 

actor decisions and contextual factors. IPE has been used by agricultural and 

international development practitioners to design project interventions and 

39The “triple bottom line” refers to 

the economic, social, and environmental 

outcomes of an investment. This term 

originated with the Corporate Social 

Responsibility movement (Elkington, 

1997), but draws upon decades of past 

work on economic impact assessment, 

environmental impact assessment, 

social and environmental assessment, 

sustainability assessment, strategic 

impact assessment, and others (Pope et 

al., 2004; Hacking and Guthrie, 2008).
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measure their local effects (Springer-Heinze et al., 2003). A hypothesized 

impact pathways model may be developed for any rural development program 

that demonstrates how the program is expected to infl uence actor decisions 

and outcomes that in turn affect community wealth (fi g. 2). When developing 

impact pathways, the following questions should be asked:40

• What types of wealth and outcomes should the development program 

affect and to what degree? What are the potential complementary and 

substitution relationships between the community’s existing assets and 

the types of wealth created by the program?

• What are the factors—including economic, institutional, and policy 

contexts—that might infl uence the program’s overall objectives?

• Which factors can be infl uenced by the proposed program and which are 

outside the scope of the project’s infl uence?

• What performance metrics, or indicators, could be used to target, track, 

and assess the program’s success at increasing the community’s wealth 

and other outcomes?

Impact pathway analysis methods have frequently been used in agricultural 

research and international development. For example, Douthwaite et al. 

(2007) use the method to design and evaluate attempts to introduce cropping practices that control an invasive plant in northern Nigeria. The impact 

pathways in their research project led to three different surveys that informed 

changes in the overall project design and implementation. IPE’s strength is in 

laying bare the relationships between program inputs, outputs, and outcomes, 

and in helping decisionmakers identify how a particular program or policy 

could increase wealth in a community or region. 

To show how IPE can work, consider the hypothesized impact pathways 

for two existing USDA Rural Development (RD) programs: the construction of a hospital (fi g. 4) and of a biorefi nery (fi g. 5). The hospital, or any 

health-related facility, could be the benefi ciary of a loan or grant under RD’s 

Community Facilities Loans and Grants program. The biorefi nery could be 

built with or benefi t from a Biorefi nery Assistance Program loan under RD’s 

Energy programs. 

The impact pathways fi gures are closely linked with the general wealth, 

decisions, and outcomes framework shown in fi gure 2. In this framework, 

communities have stocks of wealth that infl uence actor decisions and generate 

outcomes. The nature and extent of the outcomes realized are related to the 

stocks of wealth used; the economic, institutional, and policy context; and 

individual, household, and fi rm decisions. Types of wealth, actor decisions, 

and outcomes are denoted by green, yellow, and red boxes, respectively, in 

fi gures 3-4. Suggested indicators for measuring changes in wealth, shown 

in black boxes, are all available in public data sources. In addition to these 

sources, administrative data from RD programs may also provide useful indicators of project outputs and outcomes. 

It is important to note two points with respect to both impact pathway 

diagrams. First, the impact pathways are hypothesized. They rely on existing 

40Adapted from Douthwaite et al. 

(2003), pp. 251-2.
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knowledge from economic and community development theory and previous 

empirical research, and are subject to uncertainty. Impact pathways can help 

identify what should be measured at the assessment stage, which in turn can 

yield empirical results that are helpful in designing future development projects. Thinking through potential impact pathways can help identify factors 

that are likely to infl uence project success, possible negative outcomes, and 

alternative ways of achieving the project objectives. Second, the wealth and 

outcome effects of an impact pathway may occur over very different timeframes. For example, the construction of a new health facility in a rural 

community immediately increases the physical capital in the community. 

However, the effect on the community’s overall health may not be observed 

for some time.

Source: USDA, Economic Research Service.

Figure 4

Hypothesized impact pathways for usda rural development community facilities program

Loans & Grants for Construction of a

HOSPITAL

EMPLOYMENT

Related to construction of facility

EMPLOYMENT

Related to operation of facility

HIGHER WAGES

LOWER POVERTY RATE

IMPROVED HEALTH

IMPROVED PRODUCTIVITY

INCREASED ACCESS & UTILIZATION

Of health services

Construction jobs 

attract job seekers

Healthcare and related 

jobs attract job seekers

Attracts new firms JOB GROWTH

Access to health 

services increases 

attractiveness of 

region to potential 

in-migrants and firms

Wealth effects

Indicators for 

assesment

PHYSICAL

CAPITAL

HUMAN

CAPITAL

HUMAN

CAPITAL

FINANCIAL & 

HUMAN CAPITAL

IN-MIGRATION

From the increase

in demand

IN-MIGRATION

From the increase

in demand

IN-MIGRATION & 

INCREASED 

HOUSING VALUES

From the increase in 

healthcare services

HUMAN

CAPITAL

HHS ARF– No. of hospitals 

and hospital beds

Census QWI– employment

Census ACS – population

Census QWI– employment

Census ACS – population

CDC WONDER – 

morbidity, mortality

BEA Regional Accounts

ACS – Earnings

HHS ARF – utilization

Census of Housing, 

ACS – Housing Values

Census SAIPE – 

income, poverty

BEA Regional Accounts 

– sources of income

Notes: 

 ACS = American Community Survey

 ARF = Area Resource File

 BEA = Bureau of Economic Analysis 

 CDC = Centers for Disease Control 

 and Prevention

 HHS = U.S. Department of Health and Human Services 

 QWI = Quarterly Workforce Indicators

 SAIPE = Small Area Income and Poverty Estimates

 WONDER = Wide-ranging Online Data for 

 Epidemiological Research

= Wealth

= Actor Decisions

= Outcomes
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Potential Impacts of a New Health Facility 

Construction of a hospital or other health facility is likely to result directly 

in two types of employment: employment related to the construction of the 

facility and to the operation of the facility (fi g. 4). In the short run, the facility’s construction will likely result in an increased demand for labor in the 

construction and related industries. A long run increase in the demand for 

labor across a variety of health care occupations will also occur. Some of 

these new jobs may be fi lled by local residents, while others may be fi lled 

with immigrants from other communities or commuters from nearby locales 

(Renkow, 2003). The new job opportunities could lure some migrants to the 

community. New migrants, in turn, increase the stock of human capital in the 

community and increase demand for other goods and services (such as retail 

goods), which can lead to further employment and income effects.

Source: USDA, Economic Research Service.

Figure 5

Hypothesized impact pathways for USDA Rural Development Biorefinery Assistance Program

Loans & Grants for Construction of a

BIOREFINERY

EMPLOYMENT

Related to construction of facility

EMPLOYMENT

Related to operation of facility

 IMPROVED AIR QUALITY

Reduced greenhouse gas emissions

INCREASED WATER USAGE

EFFECTS ON SOIL QUALTIY

From land conversion

INCREASED DEMAND

For biomass

Construction jobs 

attract job seekers

Alternative energy 

and related jobs 

attract job seekers

Local biorefinery 

demands biomass 

from local producers

Wealth effects

Indicators for 

assesment

PHYSICAL

CAPITAL

HUMAN

CAPITAL

HUMAN

CAPITAL

FINANCIAL 

CAPITAL

IN-MIGRATION

From the increase

in demand

IN-MIGRATION

From the increase

in demand

INCREASED 

PROFITS 

For agricultural and 

other producers of 

biomass

NATURAL

CAPITAL

Economic Censusdepreciable assets & 

inventories by industry

IMPLAN – investment data

Census QWI– employment

Census ACS – population

Census QWI– employment

Census ACS – population

ARMS – Farm household 

financial assets & liabilities

EPA AirData – Air quality 

index

USGS National Water 

Quality Assessment Data – 

water quality and 

availability

USDA NRCS Soil Data 

Mart – soil quality

Notes:

 ACS = American Community Survey

 ARF = Area Resource File

 QWI = Quarterly Workforce Indicators

 SAIPE = Small Area Income and Poverty Estimates

 WONDER = Wide-ranging Online Data for Epidemiological Research

= Wealth

= Actor Decisions

= Outcomes
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In addition to increasing employment, the construction of a hospital and 

infl ux of health care professionals should lead to increased access to health 

services and improve the overall health of the community. Accessing health 

services is a challenge in many rural areas, especially in remote and less 

populated areas (Jones et al., 2009; McNamara, 2009; Ahearn and Mishra, 

2009). In some rural communities, lack of good health services may deter 

immigration or even force older residents to move to nearby urban centers 

(Cromartie and Nelson, 2009). Altering these trends by increasing health 

services can add to the community’s human capital stock. And the availability of health services is a community amenity that may increase property 

values, raising the value of the physical capital stock as well. 

The provision of health services in a community can also improve the 

productivity and increase the overall well-being of its residents. Healthier 

employees are likely to be more productive and require less time off. 

Economic theory suggests that increases in individual productivity should 

lead to higher wages. Therefore, there should be a positive relationship 

between health and wages, a hypothesis with some empirical support 

(Contoyannis and Rice, 2001). Improvements in the productivity of a local 

workforce are also likely to attract new fi rms and promote overall job growth 

in the community.

Other indicators for hypothesized outcomes from investment in a new health 

care facility—like morbidity rates and number of hospital beds—are available from public data (fi g. 4, right-hand column). 

Potential Impacts of a Biorefi nery

As another example, consider the hypothesized impact pathways for the 

construction of a generic biorefi nery (fi g. 5). Biorefi neries use biomass such as 

corn, switchgrass, or wood to produce fuels, chemicals, and electricity. In an 

effort to create new and bolster existing biorefi neries in rural places, USDA 

Rural Development’s Biorefi nery Assistance Program provides loan guarantees to assist in their startup and upgrade (USDA Rural Development, 2010). 

Constructing a biomass refi nery in a rural area has immediate and direct 

effects on physical and human capital. Building a biorefi nery increases the 

physical capital available for the community to produce energy. In the short 

run, constructing the facility requires labor, which, barring countervailing 

forces, translates into an increase in the demand for labor at the local level. The 

new jobs in the area may employ local residents and also draw in new migrants 

attracted to the available jobs, which could be estimated with input-output analysis. A similar effect is likely over the long run, as the biorefi nery begins hiring 

employees to operate the facility. Both types of employment over an extended 

period of time promise to bring in new migrants to the area. In addition to 

expanding the community’s tax base and increasing demand for local goods 

and services, these new residents bring with them skills and abilities acquired 

in other places that may add to the community’s stock of human capital.

A biorefi nery also creates demand for feedstock from nearby agricultural 

producers. High transportation costs make it likely that biomass producers 

near the biorefi nery will benefi t more than producers in general (Low and 

Isserman, 2009). The increase in demand for biomass will likely increase 
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profi ts for agricultural fi rms that provide biomass material. Higher fi rm-level 

profi ts should increase the stock of fi nancial capital available in the community. A biorefi nery may also affect natural capital by altering air quality, 

increasing demands on the local water supply, and changing land use patterns 

(fi g. 4, right-hand column). Biorefi neries in aggregate are thought to reduce 

greenhouse gas emissions, though this effect may not be seen at the local 

level (Ragauskas et al., 2006; Farrell et al., 2006). 

After developing these hypothesized impact pathways, stakeholders can 

gather data to benchmark a community or region’s level of wealth and 

track changes in it as the program is implemented. All of the indicators 

for the health facility and biorefi nery examples come from public sources. 

Depending on the geographic scale of the project and the desires of stakeholders, other data from primary sources can be used in selecting indicators. 

A few practicalities to address in designing an intervention include timing, 

geographic scale, and the need for additional data collection. With respect 

to timing, stakeholders should be aware of how frequently relevant data are 

collected and what to expect in terms of changes over time. For example, 

some indicators, such as measures of educational attainment, are inherently 

slow to change. Geographic scale should also be considered. County-level 

data, for example, may not adequately describe changes in wealth at the 

community level. Finally, stakeholders may need to collect additional data in 

order to track the progress of an intervention. For example, the primary issue 

with interpreting the proposed wealth indicators in the hospital and biorefi nery examples is attribution. At every geographic scale, a wide variety of 

exogenous factors other than the building of these facilities—both observable 

and unobservable—could affect these indicators.

Assessing Impacts of Interventions

Indicators of wealth or assets can also help in assessing the impacts of development interventions. Impact assessment is a bourgeoning fi eld in the social 

sciences, with implications for policy design. Identifi cation of the hypothesized impact pathways and indicators of changes resulting from the intervention are helpful in assessing impacts. However, impact pathways alone are 

insuffi cient to attribute the observed changes as being caused by the intervention (Douthwaite et al., 2003).

One reason for the attribution problem is that the “counterfactual” situation—

what would have happened to program participants had they not participated 

in the program or to program nonparticipants had they participated—is not 

observed. Where randomized assignment of participants and nonparticipants is possible, and where the outcomes for one group do not infl uence the 

outcomes for the other group, use of a randomized evaluation can address 

the lack of a counterfactual evaluation, since randomized assignment ensures 

that the characteristics of the treated and control groups will be statistically 

indistinguishable. Hence, the distribution of outcomes for the untreated 

control group should be statistically indistinguishable from the distribution 

of outcomes that the treated group would have experienced if they had not 

received the treatment, and vice versa. 

Many econometric methods are available for estimating the effects of 

programs when the ideal of a randomized experiment is not available 
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(Winship and Morgan, 1999; Rodrik, 2008; Imbens and Wooldridge, 2009). 

Quasi-experimental methods seek to mimic the experimental approach by 

selecting program nonparticipant units that are similar to participant units 

in observable characteristics that are hypothesized to jointly affect participation and outcomes. For example, if initial wealth levels are expected to differ 

between participant and nonparticipant groups, and if these initial differences 

are expected to affect the outcomes of interest (such as changes in wealth or 

income), then selecting nonparticipants with wealth levels similar to participants reduces this potential source of bias. 

A recent assessment of a regional development program that used quasiexperimental matching methods is Pender and Reeder (2011), which assessed 

the initial economic impacts of the Delta Regional Authority (DRA). In 

that study, changes in economic outcomes in “treated counties”— those 

participating in the DRA—were compared to outcome changes in similar 

counties outside the DRA. Indicators of some forms of wealth, such as the 

educational attainment of the local population, were among the factors used 

to identify similar counties. Such methods could be used to estimate the 

effects of various rural development initiatives on rural wealth creation and 

other outcomes. Implementing these methods requires indicators of wealth 

and changes in wealth and other outcomes, as well as program data on the 

location and level of program implementation, to be able to identify program 

participants, comparable nonparticipants, and the types and levels of program 

interventions. Identifi cation of the hypothesized mechanisms of impact and 

appropriate indicators can draw upon the general wealth, decisions, and 

outcomes framework (fi g. 2) and specifi c impact pathways. 
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Conclusions

It has long been recognized that investments in multiple forms of capital 

are needed to bring about sustainable economic development. In addition to 

investing in traditional, physical capital goods such as plants, equipment, and 

infrastructure, investments are also needed in the productive capacities of 

people (human capital), in knowledge and innovation (intellectual capital), in 

fi nancial systems and assets (fi nancial capital), in sustaining and improving 

the natural resource base (natural capital), in social relationships essential for 

achieving cooperation (social capital), in ensuring adequate representation 

and voice of actors in political processes (political capital), and in sustaining 

and building upon the cultural knowledge and values of the people involved 

(cultural capital).

Considering these multiple forms of wealth and the complex ways that they 

interact to infl uence the decisions of households, communities, and other 

stakeholders, we have developed a conceptual framework that highlights how 

the process of wealth creation is dynamic, highly context-dependent, and 

subject to considerable uncertainty. The recent development of the ethanol 

industry demonstrates that “one-size-fi ts-all” policies or program prescriptions for diverse rural contexts are likely to be fruitless. Even airtight development plans are subject to unpredictable changes in the social and economic 

environment, or unanticipated responses to innovations.

Still, those pursuing economic development are not without options. Beyond 

clarifying the complexity and diffi culty of the economic development 

process, a broad wealth creation perspective can help to identify opportunities 

to achieve more rapid and sustainable development that would be missed by 

a more narrow focus. For example, traditional rural development strategies 

that rely heavily on exploiting the natural resource base or attracting manufacturing industries to achieve near-term employment gains may miss opportunities to promote a more sustainable development pathway building on local 

natural amenities, creative capacities, or cultural resources. 

Furthermore, even traditional development strategies may be more effective if 

complementary forms of capital are inventoried and, if necessary, upgraded. 

For example, manufacturers in high-poverty outmigration rural counties often 

cite the poor quality of local schools as one of the most critical constraints 

that they face in recruiting and retaining managers and other professionals 

(McGranahan et al., 2010a). Hence, investments in improving the quality of 

local schools and their staff (physical and human capital) may be a prerequisite for a strategy focusing on attracting manufacturing fi rms.

Among the many rural wealth creation strategies that exist, local decisionmakers and support agencies must identify those that suit the local context, 

are most likely to generate wealth sustainably and locally, and are relatively 

robust to the vagaries of changing economic and social conditions. Researchbased approaches, such as those used in the industrial targeting literature, can 

be helpful in this process, but are not likely to be defi nitive. What is needed is 

an approach that identifi es and builds upon the assets, preferences, and values 

of the local population, and that fosters innovation, learning, and adaptation 

as circumstances change. 
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Several regional development programs have embraced strategic visioning, 

planning, and implementation, with successful outcomes. Some of USDA’s 

recent rural development initiatives make use of these methods (researchbased industrial targeting and strategic visioning) and encourage communities to collaborate on a regional basis to formulate strategies that have the 

potential to enhance rural wealth creation and sustainable development. 

Nonprofi t foundations and university extension programs have also recently 

partnered to use strategic visioning to address poverty issues in various rural 

communities.

To better target such wealth creation efforts, improve their design, and learn 

from successes and failures, it is important to be able to measure progress in 

wealth creation and the economic, social, and environmental outcomes associated with it, and assess how these outcomes are affected by such efforts. 

Drawing from the literature on environmental and economic accounting, 

program theory, and impact evaluation, we have identifi ed sets of indicators of different types of wealth, data sources, and methods to analyze their 

contributions to sustainable economic development outcomes. The methods 

used recently to assess wealth and “genuine savings” for countries could 

be adapted to measure some components of wealth for U.S. regions using 

publicly available data. However, attempting to measure all types of wealth 

with a single monetary indicator is not advisable. 

Such wealth assessments could identify different types of development 

pathways, including situations wherein (1) wealth depletion is undermining 

the sustainability of economic development, even if employment is being 

created in the short run; (2) one type of asset is being depleted but helping 

to fi nance investments in other assets with improved long-term prospects; 

(3) multiple types of wealth as well as incomes are declining (so-called 

“poverty traps”); or (4) investments in a broad set of assets are contributing 

to an upward spiral. Diagnosing such types of situations can help to prescribe 

appropriate policy and investment responses. For example, situation (1) calls 

for a rethinking of the investment strategy to ensure that people’s overall 

wealth and quality of life can improve over time, whereas situation (2) may 

be a sustainable pathway that should be continued. Situation (3) requires 

some kind of intervention to prevent further impoverishment, but calls into 

question whether profi table investments are possible in the local context. The 

best response to a local poverty trap may be to invest in local people’s human 

capital to enable them to move elsewhere with better prospects.

In areas where rural wealth creation interventions are to be pursued, methods 

such as impact pathway evaluation can help to improve the design of interventions and identify indicators for monitoring program performance. 

However, impact pathway evaluation is insuffi cient to attribute impacts to a 

particular intervention. Statistical methods for assessing the impacts of rural 

wealth creation interventions can often be implemented using public data on 

outcome measures combined with administrative data on program location 

and implementation. Impact assessment is much more feasible if the need for 

such assessment is recognized and the assessment methodology is determined 

from the outset of the intervention. This is obviously the case when randomized assignment of some potential participants is possible. But even when 

this is not possible, collection of baseline data on both program participants 

and comparable nonparticipants (who are not expected to be affected by the 
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program) prior to program implementation can often yield a valid comparison 

group for the evaluation at relatively low cost. 

The goal of collecting data on indicators of rural wealth creation and its 

outcomes is not to have data or scientifi c rigor for their own sakes, but to 

enable constructive learning to take place from implementation of rural 

wealth creation efforts. Without suffi cient investment in the capacity to learn 

from such efforts, policymakers and rural development practitioners may be 

forced to depend on hunches or untested theories about the latest development 

panacea, rather than basing decisions upon the best available evidence that is 

relevant to the particular local context.

To be sure, pursuing an agenda focused on promoting and measuring rural 

wealth creation, broadly defi ned, will face many challenges. There are 

problems associated with conceptualizing and measuring many types of 

intangible and nonmarketed wealth. Measuring a broad array of wealth 

and outcomes indicators can be costly, and not every conceivable indicator 

will justify the cost of measuring it. There will be diffi culties in evaluating 

outcomes along multiple dimensions, posing problems of how to assess 

tradeoffs that different decisionmakers are likely to view differently. There 

will be challenges in how to scale up the knowledge gained from assessment 

efforts, given that impacts of interventions are likely to be context-dependent.

In this report, we have only been able to scratch the surface of the diffi cult 

issues that must be addressed to implement a rural wealth creation approach. 

The conceptual framework presented is a fi rst step toward developing a 

typology of rural development contexts, which could help to address the 

need for context-specifi c knowledge. In future research, the typology of rural 

development strategies presented here could be linked to a typology of rural 

contexts—hypotheses could be developed and tested regarding which strategies work best in which types of contexts. A major task for future research 

is to build on existing approaches to measuring wealth levels and wealth 

creation in rural areas. We have identifi ed sets of indicators and data sources 

that could be used for this, but this task would require a substantial research 

investment. Impact pathway evaluation could be undertaken by researchers 

collaborating with development practitioners on rural development programs 

at local, State, and national levels. Empirical assessments of the impacts of 

such programs could also be pursued through similar collaborations.
48

Rural Wealth Creation: Concepts, Strategies and Measures / ERR-131

Economic Research Service/USDA

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Appendix A

Characteristics of wealth types

Endogeneity

Assets and investments are considered endogenous to local actors’ decisions if those actors can infl uence their levels, and exogenous otherwise. 

For example, households determine their level of fi nancial savings and individuals decide what investments in postsecondary education to make; hence 

these investments are endogenous to households and individuals. By contrast, 

some assets such as access to mountains and rivers are largely predetermined 

by natural factors, while access to interstate highways and ports are largely 

determined by actions of actors beyond local actors in rural areas. These 

assets are considered (mostly) exogenous to local decisions, although local 

actors can sometimes infl uence these assets to some extent (e.g., mountains 

can be changed by mountaintop removal mining, rivers can be displaced or 

their quality degraded by local land uses, and interstate highways may be 

degraded or preserved depending on local uses). As these examples illustrate, endogeneity/exogeneity refl ects a continuum of possible degrees of 

local infl uence on an asset, and it also depends on how “local” is defi ned and 

which actors and decisions are being considered. 

Tangibility

Physical and fi nancial assets are the most tangible of assets, meaning that 

they can be easily observed. Some aspects of natural capital, such as the 

quantity of land and forests, are also tangible, while others, such as resource 

quality, biodiversity, and ecological resilience are less so. Human capital is 

intangible, since it exists in the capacities of people and is not directly observable (Becker 1993), although the costs of producing it and its effects may be 

observable. Intellectual capital, to the extent that it exists as codifi ed knowledge in books or patents, is tangible; while tacit knowledge is not. Social, 

political, and cultural capital—like human capital—are also generally not 

readily directly observable, although their impacts may be.

Marketability

Related to the notion of tangibility is that of marketability. Tangible assets 

such as physical and fi nancial capital are generally marketable, although 

some types of physical assets such as infrastructure may not be due to their 

nature as local public goods, in which their value in use may be non-rival 

and non-excludable (discussed further below). Intangible assets are generally not marketable in themselves, although they may be marketed to the 

extent that they are embodied in marketable assets. For example, the environmental services provided by the quality of land and forests may not be 

easily marketed (although some markets are developing for such services), 

but the land itself can be marketed. Human capital assets cannot be bought 

and sold where slavery is prohibited, but the services provided by such assets 

are regularly exchanged in labor markets. Social and political capital are not 

directly marketable, although exchanges of obligations in social or political 

“markets” may behave in some ways as do markets for goods and services. 
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Cultural capital is also not generally marketable, though some aspects of 

cultural capital may have market value; for example, consumer purchases of 

traditional cultural products of Native Americans and spending on cultural 

tourism.

Measurability 

The concepts of tangibility and marketability are related to whether and how 

stocks of capital can be measured. For tangible marketable assets, one way 

to measure capital stocks is by their market value. This has the advantages of 

being a fairly simple approach to implement (for assets whose market price 

data are available) and has theoretical support for assets that are traded in 

competitive markets and that do not generate non-marketed benefi ts. For such 

assets, such as publicly traded stocks and bonds, economic theory predicts 

that the market price refl ects the marginal valuation of both buyers and sellers 

of the asset. Even in this case, however, the market value could be a substantial underestimate of the average value of the asset to those holding the asset 

(buyers and other non-sellers).41

If the asset generates returns besides those refl ected in market prices, this 

is further reason that market prices could underestimate the average value 

of an asset. For example, education and other investments in human capital 

are likely to have benefi ts to individuals that are not refl ected in increased 

wages or productivity. Schultz (1961) and Becker (1993) argued that this 

refl ects the consumption value of human capital investment (or “psychic 

income”). Hence, measures of the value of human capital that are based on 

estimated impacts of human capital investments on the lifetime income of 

individuals will understate the total value of the investment to those individuals. Furthermore, if the benefi ts of human capital investment spill over to 

other people and fi rms, as argued by human capital and endogenous growth 

theorists, then the social value of human capital investment will be greater 

than the value to the direct recipients of such investment. Investments in other 

types of capital can also yield positive spillover impacts, such as investments 

in improved natural capital (e.g., improved land management that improves 

water quality downstream) or social capital (e.g., formation of social organizations that result in unforeseen benefi ts by facilitating new opportunities). 

In other cases, investment in assets may generate costs that spill over to other 

agents (e.g., pollution caused by investments in physical capital). 

These examples relate to the excludability of the benefi ts of investing in a 

particular type of capital, which we discuss further below. The point here 

is that such spillover impacts make it more diffi cult to value the assets that 

generate them, since market prices may not refl ect such impacts. Methods of 

valuing the non-market costs and benefi ts of economic activities have been 

developed by environmental economists and others, including methods based 

on assessing impacts on property values, transport costs or other affected 

market activities, stated preference methods, and others (Shiferaw, et al. 

2005). All of these methods have drawbacks, including stringent assumptions 

necessary for the validity of the methods and signifi cant data requirements. 

The problems of accurately measuring wealth, as the preceding discussion 

attests, are signifi cant even for tangible marketable assets, but are more challenging for intangible and non-marketable forms of wealth, such as human, 

41For a buyer, the marginal value 

is the value of buying an additional 

unit beyond the last unit purchased, 

while the marginal value for a seller is 

the value of selling an additional unit 

beyond the last unit sold. In competitive 

markets, profi t-maximizing buyers are 

predicted by economic theory to buy 

all units whose marginal value exceeds 

the market price (since otherwise profi ts 

could be increased by buying more 

units), while sellers are predicted to 

sell all units whose marginal value is 

below the price (since otherwise profi ts 

could be increased by selling more 

units). This does not mean that the 

average value of the asset (total value 

divided by the total quantity of the asset 

held) will be the same for buyers and 

sellers. Since buyers will keep only 

assets whose marginal value is at least 

equal to the market price, the average 

expected value of the assets that they 

hold will be greater than or equal to 

the market price; while the opposite is 

true for sellers. Thus, the total market 

value of an asset traded in competitive 

markets is a lower bound estimate of 

the total estimated value of the asset 

to those who hold the asset. If there is 

substantial heterogeneity among market 

agents or assets and/or large uncertainty 

affecting future returns to assets, the 

difference between the market value 

and the average value of assets to their 

owners may be quite large. 
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social, cultural, and political capital. Valuation of many kinds of wealth using 

a monetary metric is not likely to be theoretically defensible or empirically 

feasible. This does not mean that no useful measures are possible, even if 

aggregating all types of wealth using a single cardinal measure such as the 

net monetary value of wealth is not feasible. Useful indicators may be based 

on other types of measures, such as ordinal indicators (e.g., whether various 

types of natural or social capital have improved or degraded) or ranking indicators (e.g, which types of capital are most important to particular actors in a 

particular context). As one moves away from measuring tangible marketable 

types of wealth to less tangible and marketable ones, this inevitably involves 

a greater degree of subjectivity, since perceptions about such indicators may 

differ across individuals. 

Liquidity 

Liquidity is related to marketability. Financial assets are generally the most 

liquid form of wealth, meaning that they can be easily sold. This is a critical 

characteristic, since liquidity is essential for actors (whether individuals, 

fi rms, governments, or other organizations) to be able to manage their cash 

fl ow needs and cope with risks. Many other types of assets are not themselves 

liquid but can be used to obtain credit where well-functioning credit markets 

are available. For example, equity in land, houses, or other real estate is relatively illiquid (due to the indivisible nature of these assets and the signifi cant 

costs of sales transactions), but is generally considered a reliable source of 

collateral where titles to real estate are secure and real estate values are stable 

or increasing, which can enable owners to use credit to meet cash fl ow needs 

and hold fewer liquid assets (which generally yield low expected returns). 

Social and political capital are not liquid but also may enable actors to access 

fi nancial capital during critical periods (e.g., individuals borrowing from 

friends and family during a crisis; farmers obtaining disaster payments from 

the Federal Government after a drought). Other types of illiquid assets, such 

as human capital, may not be viewed as good collateral by lenders because 

the lender cannot take ownership of the asset in the event of a loan default. 

Lenders may be able to recover loans made on the basis of the value of the 

borrower’s human capital where technologies, institutions, and policies make 

it feasible to collect from the borrower’s future earnings (e.g., by garnishing 

the future wages of student loan recipients or using reputational penalties 

through credit ratings systems), though this may still involve signifi cant costs 

and risks to the lender.

Divisibility

Related to liquidity is the degree of divisibility of the asset. Many fi nancial assets can be obtained in increments of any size and so can be divided 

and sold in any increment, which enhances their liquidity. Many physical 

assets, such as houses, plants, and equipment are not divisible in themselves, although fi nancial assets can be created in many circumstances to 

buy and sell divisible ownership shares of such indivisible assets. It is more 

diffi cult to create a market in shares of less tangible assets such as human 

or social capital. For indivisible assets, investors face a larger cost and risk 

of investing, since they must achieve a minimum scale of investment to 

obtain any returns from the asset. The fi xed cost of investing in such assets 
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can make it diffi cult for small-scale investors to profi t from these types of 

investments. For example, small communities may not be able to profi t from 

investing in costly forms of infrastructure, public facilities, improved legal 

systems, or other investments that serve primarily local demand, which may 

be too small to justify the fi xed costs of the investments.

Rivalry and excludability

Two critical characteristics of the fl ows of services from assets are whether 

they are rival and/or excludable. These characteristics determine whether 

these assets and their services are likely to be provided by competitive private 

markets or must be provided by some other institutional form. According to 

economic theory, pure private goods have two common characteristics: they 

are rival in consumption—meaning use of the good or service by one person 

reduces its availability for use by other people—and excludable—meaning 

that it is possible at low cost relative to the value of the good or service to 

exclude others from use of the good once it is provided (Cornes and Sandler 

1996). Such goods are readily provided by private markets; examples include 

most common goods provided in private markets, including food, clothing, 

vehicles, housing, etc. Pure public goods, by contrast, are non-rival and nonexcludable in consumption, which implies that private agents cannot profi t by 

providing them in competitive markets (due to non-excludability) and that the 

good is more effi ciently provided by a single provider than a large number of 

competitive producers (due to non-rivalry). Examples of public goods include 

national security, the quality of the air we breathe, and uncongested public 

highways. Governments are generally involved in providing such goods.

Two other categories of goods based on this classifi cation are common pool 

resources such as fi sheries and urban roads (under conditions of congestion), 

which are rival in use but for which exclusion is not possible (or highly costly 

relative to the value of doing so); and club or toll goods such as satellite television, toll roads, or patented new technologies, which are non-rival in use 

(if not congested) but for which exclusion is feasible and not highly costly. 

Common pool resources are subject to problems of overuse (“the tragedy 

of the commons”) due to the diffi culty of excluding users and the costs that 

overuse imposes on all users (Hardin 1968). Hence governments are often 

involved in regulating their use, although non-governmental voluntary organizations or associations can also be successful in managing them through 

cooperative arrangements (Ostrom 1990). Where voluntary cooperation is 

needed to manage common pool resources, the level of existing social capital 

is likely to be an important determinant of success. Toll goods are commonly 

provided by private investors, but may be underprovided due to the monopolistic power held by the providers. 

These categories are presented as ideal types, but in reality there is a spectrum of types between these extremes. For example, as suggested above, the 

classifi cation of a road or highway depends on the degree of congestibility in 

its use and the costs of excluding users relative to the value of doing so. These 

characteristics can change as a result of changing demand for the resource 

(e.g., increased congestion of roads due to population growth) and changing 

technologies and institutions (e.g., electronic means of charging for use of toll 

roads that reduce the cost of exclusion).
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Externalities

Related to the concept of non-excludability is the concept of externalities 

or spillovers. Goods and services that generate benefi cial impacts to people 

or fi rms who don’t directly purchase the good or service are said to cause a 

positive externality or spillover. For example, workers’ or fi rms’ investments 

in increased intellectual or human capital may generate positive impacts on 

other workers or fi rms as they observe and learn from others. According to 

some growth theorists, this type of spillover may be responsible for enabling 

longrun economic growth to occur and may explain the divergence of the 

growth performance of different countries or regions (Romer 1986; Lucas 

1988). Positive spillovers within regional economies may also account for the 

development of large urban centers and the higher productivity of fi rms and 

workers within such centers (Duranton and Puga 2004). Besides spillovers of 

human or intellectual capital, indivisibilities or positive spillover impacts of 

physical, social, or other forms of capital also could contribute to agglomeration economies. 

Negative spillovers involve costs that are imposed on other actors by the 

economic decisions of one set of actors. Common examples include water and 

air pollution or, more generally, congestion impacts resulting from overuse 

of common pool resources. Such impacts can retard the sustainability of the 

development process as depletion of such resources offsets gains from investments in other types of capital. As suggested above, negative spillovers often 

affect natural resources, but these spillovers are not necessarily limited to 

impacts on natural capital. For example, development of physical or human 

capital may undermine traditional social relationships in communities, 

depleting the stock of social capital and undermining the ability to attain 

cooperation among different social groups. An example is where development 

of roads and increased mobility of the local population undermine the ability 

to achieve cooperation in providing local public goods, because this increases 

the opportunity costs of cooperating and the “exit options” of individuals, 

making it more diffi cult to punish non-cooperation (Bardhan, 1993). 

Non-income benefi ts

Another important characteristic of different types of wealth is the 

objective(s) of the actor making the investment. For many types of physical 

or fi nancial capital, the objective is primarily to increase income, whether 

by increasing productivity (e.g., plant and equipment, training) or through 

dividends, interest, or rent (fi nancial assets, investment real estate). However, 

many types of assets contribute to well-being in ways other than solely by 

increasing income, such as investments in residential housing, water and 

sewer systems, education, health, and social and political relationships. The 

returns to such investments are thus not fully refl ected in their impacts on 

income. This is an important point to keep in mind when considering indicators of the outcomes of investments of different kinds.
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Appendix B

Conceptual frameworks for wealth creation 

and rural livelihoods

Several conceptual frameworks for wealth creation and rural livelihoods have 

been proposed in the literature on community or rural development, with all 

incorporating multiple types of capital and several discussing various contextual factors, policy and institutional infl uences, livelihood strategy and investment decisions by various actors, and multiple types of outcomes. We review 

some of these here. We fi nd parallel development of similar concepts and 

frameworks in the literatures focused on community or rural development in 

the United States and Canada and on agricultural and rural development in 

developing countries.

Community and rural development literature in the 

United States and Canada

In the U.S. community development literature, Kretzmann and McKnight 

(1993) proposed a framework for mapping community assets, considering the 

assets of individuals (and households and families), associations, and “institutions” (defi ned by Kretzmann and McKnight to include formal organizations 

such as businesses, schools, and hospitals). Although they did not use the 

“capitals” terminology, Kretzmann and McKnight’s focus was on building on 

the human, social, cultural, political, physical, and fi nancial capital available 

to these different types of community actors to achieve community development. Their main thesis was that community development is more likely to 

be successful if it is based on the (often unrecognized) assets that exist in a 

community, rather than the traditional focus on needs, problems, and defi -

ciencies. This “asset-based community development” (ABCD) approach was 

originally applied to development of urban communities in the United States, 

but has since been applied in rural and urban communities of both developed 

and developing countries (O’Leary 2007; Russell 2009). 

Drawing on Kretzmann and McKnight’s ABCD framework, Green and 

Haines (2002) discussed building fi ve types of community assets to achieve 

community development: human, social, physical, fi nancial, and environmental capital. They emphasized the roles of community-based organizations (CBOs) in building these assets, arguing that CBOs are in many cases 

better able than private markets or governments to build these assets in a way 

that benefi ts communities, particularly low-income and minority communities. Green and Haines focused primarily on urban neighborhoods, but 

also considered examples of community development in suburban and rural 

communities and the factors affecting them. 

In the U.S. rural development literature, Castle (1998) proposed a conceptual 

framework for studying rural places incorporating four types of capital—

natural, built, human, and social capital. Castle argued that development and 

conservation of all four types of capital should be the core concept of rural 

studies, emphasizing the need to understand relationships among all types 

of capital, the contributions of each, and processes of change among these 

capitals. He argued that the dynamics of rural economies depend crucially 
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on whether there are increasing returns to scale and path dependence, 

drawing from the ideas of Romer (1986) and Arthur (1994). Since increasing 

returns and path dependence can result from processes of innovation, Castle 

also emphasized understanding how investments in intellectual capital are 

affected by government policies, such as various forms of regulation. 

Also in the U.S. rural development literature, Flora and Flora (2004) defi ned 

seven types of rural community capital in what is now referred to as the 

“community capitals framework” (CCF); including cultural, social, human, 

political, natural, fi nancial and built capital. They considered the diverse 

contexts of rural America as affected by factors such as population level and 

density, degree of isolation from urban centers and infrastructure, ethnicity, 

natural amenities, persistent poverty, local institutions, history, and other 

local factors that infl uence the rural development prospects of each community. They also considered broader trends and processes that infl uence the 

transformation of community capitals, such as structural changes in the 

economy, international trade and macroeconomic policies, and domestic 

sectoral policies. The roles of different actors and decision processes in 

community development—including individuals, households, civil society 

organizations, businesses, communities, and governments at different 

levels—are also discussed within their framework. The framework and examples provided by Flora and Flora illustrate the complex and context-dependent 

nature of rural community development in the United States and the roles of a 

diverse set of actors in defi ning the meaning and objectives of rural development and in determining its outcomes.

Reimer (2006) proposed a framework for understanding how contextual 

factors affect the capacity development process in rural communities of 

Canada, drawing upon the work of Kretzmann and McKnight (1993), Green 

and Haines (2002), and Flora and Flora (2004). Reimer’s framework includes 

four types of assets and liabilities—economic capital, human skills and abilities, social capital, and natural resources—and local contextual conditions 

such as the degree of integration to the global economy, stability of the local 

economy, metro-adjacency, and institutional capacity. It also considers how 

these assets and contextual factors infl uence the action processes (marketbased, bureaucratic, communal, and associational) through which communities reorganize their assets to produce economic, social, and environmental 

outcomes (Figure B1). Reimer applied this framework to study how contextual factors condition the relationship between social capital and outcomes 

among a sample of 20 rural communities in Canada and found that the 

correlations between several indicators of social capital and various outcome 

measures differ across community contexts. Although the small sample size 

and need for more indepth analysis limited the ability to draw strong conclusions, Reimer’s study suggests the need to take different contexts into account 

in studying rural community development processes. 

The Ford Foundation is pursuing a rural wealth-creation approach that 

emphasizes investments in seven types of capital: intellectual (knowledge, 

innovation, and creativity), social, individual (skills and health of people), 

natural, built, political, and fi nancial (Ratner 2010). The approach is guided 

by six principles: (1) wealth is created and “sticks” in low-wealth rural areas 

through intentional actions seeking to create the different types of wealth 

without undermining other forms and involving local ownership and control 
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of wealth; (2) wealth is tied to place through value chains developed within 

sectors that connect rural to urban areas and low-wealth people to higher 

wealth people; (3) wealth-based development is demand-driven, embracing 

market and policy interventions that stimulate demand in markets with potential for place-based wealth creation; (4) measurement of the different types of 

wealth is integrated into the process; (5) investments based on “value propositions” that specify the self-interests of value chain participants fuel wealth 

creation; and (6) fl exible strategies for wealth creation are developed in 

context with committed regional partners, avoiding “cookie cutter” interventions and interventions that damage some types of wealth. The emphasis on 

a demand-driven and fl exible approach to wealth creation is similar to other 

community development approaches.

International agricultural and rural 

development literature

Similar conceptual frameworks have been proposed, apparently independently of the North American literature, in the international agricultural and 

rural development literature. Scoones (1998) and Carney (1998) developed 

the sustainable livelihoods framework (SLF), which has been used by the 

Department for International Development (DFID) of the United Kingdom 

and other international development organizations. This framework, drawing 

upon earlier work by Chambers and Conway (1992) and others, considered 

rural people’s livelihood strategy decisions to be infl uenced by fi ve types of 

assets (human, natural, fi nancial, physical, and social capital); by the vulnerability context within which they make decisions, including shocks, trends, 

and seasonal variations; and by transforming structures and processes, such 

Source: Reimer (2006). 

Figure B1

New rural economy capacity model

Assets and Liabiilities

s%CONOMICCAPITAL

s(UMANSKILLSANDABILITIES

s3OCIALCAPITAL

s.ATURALRESOURCES

s0OLITICALCAPITAL

Processes

"UREAUCRATIC

!SSOCIATIVE

-ARKET #OMMUNAL

Outcomes

s%CONOMICWEALTH

s3OCIALANDPOLITICAL

INCLUSION

s3OCIALCOHESION

s%NVIRONMENTALSECURITY

s3OCIALANDSELFWORTH

s(EALTH

s0ERSONALSECURITY

/UTCOMESCANBECOMENEWASSETSANDLIABILITIES

Source: Reimer (2006).

Context: Institutions and Entitlements
70

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as the structure of different levels of government and the private sector, and 

laws, policies, culture, and institutions (Figure B2). DFID (1999) defi ned livelihood strategies as “the range and combination of activities and choices that 

people make/undertake in order to achieve their livelihood goals (including 

productive activities, investment strategies, reproductive choices, etc.)”. 

Examples of livelihood strategies pursued by rural households in developing 

countries include agricultural intensifi cation or extensifi cation, livelihood 

diversifi cation (e.g., nonfarm activities), and migration (Scoones, 1998). Such 

strategies are seen as leading to various economic, social, and environmental 

outcomes, which in turn affect changes in assets over time.

One criticism of the SLF has been that it pays insuffi cient attention to 

power and politics (Farrington et al., 1999). In response, some authors have 

proposed adding political capital to the SLF as one of the types of local assets 

affecting livelihood strategy options and decisions (Baumann and Sinha, 

2001). Others have argued that this is insuffi cient and that broader structures 

of inequality and political economy must also be considered (Scoones 2009). 

Such considerations were meant to be included as part of the analysis of 

development context and the transforming structures and processes (Scoones, 

1998; DFID 1999). However, these were often not incorporated into the analyses that were conducted using the SLF (Scoones, 2009).

Bebbington (1999) proposed a “capitals and capabilities framework” that 

was similar in many respects to the SLF. Like the SLF, Bebbington’s framework emphasized the importance of local actors (individuals, households, 

and organizations) having access to multiple types of assets, although the set 

of assets that he focused on was slightly different: natural, human, cultural, 

social, and produced capital. Bebbington argued that these capital assets 

are important to people not only to achieve material well-being, but also to 

make their livelihoods meaningful and to provide them with capability (in 

Figure B2

Sustainable livelihoods framework

Vulnerability context

s3HOCKS

s4RENDS

s3EASONALITY

Transforming structures 

and processes 

Structures 

s,EVELSOF

GOVERNMENT

s0RIVATESECTOR

Livelihood assets

Key

((UMANCAPITAL

..ATURALCAPITAL

&&INANCIALCAPITAL

33OCIALCAPITAL

00HYSICALCAPITAL

3OURCE$EPARTMENTFOR)NTERNATIONAL$EVELOPMENT	

Livelihood

strategies

)NFLUENCE

ACCESS

Livelihood 

outcomes

s-OREINCOME

s)NCREASED

WELL
BEING

s3EASONALITY

s2EDUCED

VULNERABILITY

s)MPROVEDFOOD

SECURITY

s-ORESUSTAINABLE

USEOFNATURAL

RESOURCES

s,AWS

s0OLICIES

s#ULTURE

s)NSTITUTIONS

Processes

H

N

F 0

3

I

N

O

R

D

E

R

T

O

A

C

H

I

E

V

E
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the sense of Sen (1981)) to “change the rules of the development game.” He 

argued that cultural capital is particularly important to provide meaning, 

such as the value attached to living in a particular rural place. Cultural 

and other forms of capital can also be a source of power, according to 

Bebbington, enabling them to alter the political, economic, and institutional 

context affecting their livelihoods, such as by organizing to obtain better 

terms of trade on their products.

De Janvry (2003) developed a framework for “integral rural development” 

that apparently was based on the SLF. In his framework, the elements of 

the SLF (household assets, context, livelihood strategies, and outcomes) are 

labeled as the well-being determination process. The main innovation in de 

Janvry’s framework is specifi cation of entry points for rural development 

programs to infl uence different components of the well-being determination process (fi ltered through the program implementation process) and/

or the policymaking and program design process. For example, land reform 

programs can be used to address households’ limitations in access to natural 

capital; market or governance reforms or investments in local public goods 

can address limitations in the context; social protection programs can seek 

to improve well-being outcomes directly; and programs for social incorporation and empowerment can help to improve the policy process and program 

design and implementation to better serve the poor. This framework helps 

to address another criticism of the SLF – the need to more explicitly specify 

the linkages between the internal community factors in the SLF and the 

more macro-level political factors, policies, and programs infl uencing them 

(Scoones, 2009).

Pender et al. (2006) developed a conceptual framework specifying the 

factors affecting East African rural households’ livelihood strategies and 

land management decisions and the outcomes of those decisions. Like the 

SLF and de Janvry’s (2003) framework, their framework incorporated fi ve 

types of household assets (physical, human, natural, fi nancial, and social 

capital) and local contextual factors (agricultural potential, population 

density, access to markets, programs and services, and local institutions and 

culture). Also, like de Janvry (2003), Pender et al. (2006) considered how 

government policies, programs, and institutions could affect the development 

process at different levels through various entry points, such as by affecting 

household endowments, local market or institutional development, livelihood 

strategy, and land management decisions, or directly affecting outcomes. 

They used this framework to generate hypotheses and synthesize fi ndings 

of a set of research studies investigating the determinants and impacts of 

rural livelihoods and land management decisions in the East African highlands. Like Reimer (2006), their fi ndings demonstrate how the infl uence of 

different types of capital on livelihood decisions and outcomes depends upon 

the local context.

Synthesis

The conceptual frameworks reviewed above were developed and have 

been used for a variety of purposes: some have been used primarily to 

guide research on development processes (e.g., Castle (1998), Reimer 

(2006), and Pender et al. (2006)); some have been used mainly to guide 
72

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rural development programs (e.g., Ratner (2010)); and some have been 

infl uential both with rural development researchers and practitioners (e.g., 

Kretzmann and McKnight (1993); Flora and Flora (2004); Carney (1998); 

Scoones (1998)). There are differences of emphasis across these frameworks, 

including differences in the set of assets considered, which actors and decisions are the focus, which contextual factors and processes are taken into 

account, which development outcomes are considered, and whether explicit 

consideration is given to particular policy and program entry points for 

affecting the wealth-creation and livelihoods-generation process.

Despite these differences, there are many commonalities across these frameworks. All emphasize the importance of building on and building up a broad 

range of assets. All emphasize the central role of local actors in determining 

their own development prospects, although some explicitly include a role 

for external actors such as governments and development programs. Most 

emphasize the critical role of local contextual factors in conditioning the 

opportunities and constraints affecting rural wealth creation and improvement of livelihoods. All emphasize the importance of considering multiple 

outcomes of development processes, including in most cases economic, 

social, and environmental considerations. All emphasize the dynamic nature 

of these processes, with outcomes involving changes in assets that affect 

livelihood options and strategies in the future. Some emphasize that wealth 

creation yields benefi ts beyond improving people’s material well-being, 

for example contributing to greater meaning and empowerment. This adds 

another important dynamic aspect to the framework, since wealth creation 

may not only affect communities’ and individuals’ asset endowments but also 

can affect the policy and institutional context by empowering local actors. 

Such impacts may only occur over larger scales than individual rural communities and over longer timeframes than a few years, but they may be the basis 

of larger and more sustainable impacts of rural development efforts.
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Appendix C

Available data on selected wealth indicators

Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Physical 

capital

Private 

physical 

capital stock

Private capital stock 

could be estimated 

by allocating BEA 

national capital stock 

data by industry to 

counties based on 

each county’s share of 

national employment or 

earnings by industry

BEA has national 

estimates of private capital 

stock,and estimates of 

employment and earnings 

by industry and county

County Annually

Public 

physical 

capital stock

Public capital stock 

could be estimated 

using the perpetual 

inventory method (PIM)

Federal investment data 

available in Consolidated 

Federal Funds Report 

(CFFR); State and local 

investment data from 

annual State budgets and 

Census of Governments 

(COG); balance sheets 

of governments in some 

States

County Annually 

for CFFR 

and State 

budgets, 

every 5 years 

for COG

Access to 

broadband 

internet

% of population with 

access by number of 

providers, technology 

(DSL, fi ber, cable, 

wireless), and speed 

ranges 

National Broadband Map

www.broadbandmap.gov

County, 

Census places, 

Congressional 

Districts

As of 6/30/10

# of community anchor 

institutions with access 

and range of download 

speeds 

www.broadbandmap.gov County, 

Census places, 

Congressional 

Districts

As of 6/30/10

Access to 

highways

Population weighted 

distance to nearest 

interstate highway on 

ramps and to other 

highway intersections

Economic Research 

Service analysis of 

highway data

County

Access 

to water 

and sewer 

facilities

% of houses lacking 

complete plumbing 

facilities

Population Census County, county 

subdivision and 

place, tract

Decennial to 

2000

American Community 

Survey

County, county 

subdivision and 

place, tract

--continued
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Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Physical 

capital

Residential 

buildings 

Median and distribution 

of housing values and 

mortgage status

Population Census Census block 

and higher 

(census 

tracts, ZIP 

Code, county 

subdivision, 

county, etc.)

Decennial to 

2000

American Community 

Survey (ACS)

County

New housing 

construction, number of 

units and value by type

Census Bureau Survey 

of Residential Building 

Permits

County or 

Census Place

Annually

Household 

physical 

assets

Real estate property 

and vehicles

Survey of Income and 

Program Participation 

(SIPP)

State by metro/

non-metro

Monthly for 

up to 4 years 

within panels

Farm 

household 

physical 

assets

Value of land, dwelling, 

buildings, livestock, 

non-farm business 

assets, other

Agricultural Resource 

Management Survey 

(ARMS)

USDA National 

Agricultural 

Statistics 

Service (NASS) 

regions or 

Economic 

Research 

Service (ERS) 

farm resource 

regions, 15 

selected States

Annually

Farm real 

estate value 

(land and 

buildings)

Value per acre of farm 

real estate (land and 

buildings)

NASS June Area Survey State Annually

Business fi xed 

capital and 

inventories

Gross value of 

depreciable assets 

and inventories in 

selected industries 

(mining, construction, 

manufacturing), 

beginning and end of 

year

Economic Census State (for 

construction and 

manufacturing), 

U.S. (for mining)

Every 5 years 

to 2007

Financial 

capital

Household 

fi nancial assets 

and liabilities

Savings, stocks, bonds, 

retirement accounts, etc.

SIPP State by metro/

non-metro

Monthly for 

up to 4 years 

within panels

--continued
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Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Financial 

capital

Farm 

household 

fi nancial 

assets and 

liabilities

Farm and non-farm 

fi nancial assets (cash, 

checking, savings, 

certifi cates of deposit, 

stocks, retirement 

accounts) and debts 

(mortgages, loans from 

businesses, personal 

loans, etc.)

ARMS NASS regions 

or ERS farm 

resource 

regions, 15 

selected States

Annually

Business 

fi nancial 

assets and 

liabilities

Financial assets and 

liabilities of publicly 

traded corporations

Securities and Exchange 

Commission

Global, by 

headquarters of 

corporation

Quarterly

Financial 

assets and 

liabilities 

of State 

and local 

governments

Cash and security 

holdings in insurance 

trust funds, debt 

offsets, bond funds, 

other; and long- and 

short-term debt

Census Bureau, Annual 

Surveys of State and Local 

Governments; Census of 

Governments

States and 

counties

Annually for 

States, every 

5 years for 

counties

Bankruptcy 

fi lings

Number of business 

and nonbusiness 

bankruptcy fi lings

U.S. Courts Statistics Circuits and 

districts

Annually

Natural 

capital

Natural 

amenities 

Index of climate, 

topography, and water 

area characteristics

ERS natural amenities 

scale

County N/A

Land quality Land Capability 

Classifi cation and 

Prime Farmland 

Classifi cation

USDA Natural Resources 

Conservation Service 

(NRCS), Soil Data Mart

County 2000-2003

Soil quality Amenability of land to 

agricultural production

NRCS, Soil Data Mart County Varies

Cropland 

value

Value per acre of 

irrigated and nonirrigated cropland

NASS June Area Survey State Annually

Pasture value Value per acre of 

pasture

NASS June Area Survey State Annually

Air quality Air quality index Environmental Protection 

Agency (EPA), AirData 

system

County and ZIP 

Code

Annually

Number of unhealthy 

air quality days per 

year

EPA (www.epa.gov/

aircompare/)

County 2010

--continued
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Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Natural 

capital

Air quality ranking 

based on exposure, 

health risks or 

emissions, by type of 

pollutant

http://scorecard.

goodguide.com/

County Varies

Water quality Levels and changes in 

nutrients, inorganic and 

organic water pollutants

U.S. Geological Survey 

(USGS) National Water 

Quality Assessment Data 

Site-level, varies Annually, 

monthly, daily

% of surface water with 

impaired or threatened 

uses

http://scorecard.

goodguide.com

County 1998-1999

% of water bodies 

impaired by specifi c 

pollutants

http://scorecard.

goodguide.com

County 1998-1999

Toxic 

chemicals

% of houses with a high 

risk of lead hazards

http://scorecard.

goodguide.com

County and 

Census Tract

Varies

Presence of a 

Superfund Toxic Waste 

Site

http://scorecard.

goodguide.com

County Varies

Mineral 

resources 

availability

Availability of minerals USGS Mineral Resources 

Data System

Site-level (by 

geographic 

coordinates)

Varies

Mineral 

resources 

production

Annual production of 

minerals by type

USGS Minerals Yearbook State Annually

Energy 

resources

Availability of oil, gas, 

and coal; resources 

and economically 

recoverable reserves 

of coal 

USGS National Oil and 

Gas Assessment, Coal 

Assessments (e.g., 

National Coal Resource 

Assessment, USGS, 

2009)

USGS Regions 

(e.g., coal 

basins)

Varies

Wind energy 

potential

Mean wind speed at 80 

meters above ground 

Land area with good 

potential for wind 

generation

U.S. Department of Energy 

(DOE) 

 http://www.

windpoweringamerica.gov/

wind_maps.asp

2.5 km 

resolution 

 State

N/A

Forest 

resources

Forest area, volume, 

net growth, and 

removals

U.S. Department of 

Agriculture, Forest 

Service, Forest Inventory 

Data Online

County Varies

--continued
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Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Natural 

capital

Recreational 

opportunities

Number of 

establishments 

and employment 

in arts, recreation 

and entertainment 

businesses

Census Bureau, Economic 

Census

County and 

Census Place

Latest 2007

Census Bureau, County 

Business Patterns (CBP)

County Annually

Human 

capital

Population Total population Population Census Census block 

and higher

Up to 2010

American Community 

Survey (ACS)

County a

Educational 

attainment 

Distribution of 

adult population by 

educational attainment 

Population Census Census block 

and higher 

Decennial to 

2000

ACS County a 

School and 

student 

quality

Public school 

enrollment and 

graduation rates, pupil/

teacher ratio

National Center for 

Education Statistics 

(NCES)

School district Annually by 

school year 

Dropout rates, per pupil 

spending

www.localschooldirectory.

com

School district Annually

Reviewer ratings of 

school quality

www.localschooldirectory.

com

School Up to present

Students’ scores on 

state profi ciency tests 

and ranking within tate

www.city-data.com School Recent 

year(s)

Age 

distribution

Distribution of 

population by age

Population Census Census block 

and higher 

Decennial to 

2000

ACS County a 

Labor 

force and 

employment 

status

Distribution of 

population by labor 

force and employment 

status

Population Census Census block 

and higher 

Decennial to 

2000

ACS County a 

Occupation Distribution of 

population by 

occupation

Population Census Census block 

and higher 

Decennial to 

2000

ACS County a 

Disability Distribution of 

population by disability 

status

Population Census Census block 

and higher 

Decennial to 

2000

--continued
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--continued

Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Human 

capital

Health Mortality rates, change 

in mortality rates

Centers for Disease 

Control and Prevention, 

Wide-ranging Online 

Data for Epidemiological 

Research (WONDER)

County Annually

% of population with 

specifi c diseases 

Healthstatus2010.com County 2007

% of mothers with 

specifi c diseases, 

health risks 

Healthstatus2010.com County 2007

Deaths due to mental 

disorders, suicides

Healthstatus2010.com County 2007

Mortality rates by sex, 

race, and major causes

Healthstatus2010.com County 2007

% obese, adults and 

youth 

Healthstatus2010.com County 2004-2007

Reproductive health 

indicators 

Healthstatus2010.com County Various to 

2007

Rates of violent crimes 

by type

Healthstatus2010.com County Various to 

2006

Intellectual 

capital

Inventions Number of patents U.S. Patent and 

Trademark Offi ce

City and State 

of inventor and 

assignee

By year since 

1976

Social 

capital

Civic, social, 

and other 

voluntary 

organizations 

and 

associations 

Number or number per 

capita of organizations, 

number or number 

per capita of paid 

employees, and total 

payroll or payroll per 

capita, by type of 

organization 

CBP ZIP Code and 

county

Annually

Public 

charities 

and other 

tax exempt 

organizations

Number of 

organizations, 

revenues, expenses, 

balance sheet by type 

of organization

National Center for 

Charitable Statistics 

(NCCS)

ZIP Code Annually

Volunteer 

work

Share of population 

participating in 

volunteer work

Census Bureau, Current 

Population Survey 

(CPS)

State and 

metro/

nonmetro

Annually
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Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Social 

capital

Good citizenship Share of households 

responding by mail to 

Census

Population Census Census block 

and higher

Decennially

Participation in 

blood donation 

programs

Trust Share of survey 

respondents agreeing 

that “most people are 

honest”

Annual “Life Style” 

surveys conducted 

by commercial 

polling fi rm Market 

Facts (Knack 2002)

State Annually

Political 

capital

Voting participation Percent of eligible 

voters who registered 

and who voted in 

Federal elections

CPS, Voting and 

Registration 

Supplements

State and 

metro/nonmetro

Every two 

years

Seniority of 

Congressional 

representatives

Seniority ranks 

of Senators and 

Representative 

Almanac of 

American Politics 

(AAP)

State and 

Congressional 

District

Every two 

years

Leadership 

positions of 

Congressional 

representatives

Positions of Senators 

and Representatives 

in party leadership 

or positions on key 

committees 

AAP State and 

Congressional 

District

Every 2 years

Majority party Whether Senators and 

Representatives are in 

the majority party

AAP State and 

Congressional 

District

Every 2 years

Competitiveness 

of voting 

% of vote to winning 

candidate in past 

elections 

AAP State and 

Congressional 

District

Every 2 years

Cultural 

capital

Ethnicity Distribution of 

population by ethnicity

Population Census Census block 

and higher 

Decennial to 

2000

ACS County a

Language and 

origin

Distribution of 

population by language 

spoken at home; 

distribution by region of 

origin

Population Census Census block 

and higher 

Decennial to 

2000

ACS County a 

--continued
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Concept Variable Indicator Data sources Smallest 

geographic unit Time period

Total 

wealth

Present value 

of future 

sustainable 

consumption 

expenditures

Present value of 

future sustainable 

consumption can 

be estimated by the 

equation: 

Wt=∫ t

∞ Ct

e-ρ(s-t)ds, 

where Ct is sustainable 

consumption 

(consumption plus 

change in net worth) 

in year t, and ρ is the 

rate of time preference 

(World Bank 2006)

Data on consumption 

expenditure and 

changes in assets and 

liabilities are available 

in the Bureau of Labor 

Statistics Current 

Expenditure Survey

Rural U.S. 

as a whole, 

or metro/

non-metro by 

BLS region 

(and for some 

States using 

Consumer 

Eexpenditure 

Survey public 

use microdata)

Annually for 

rural U.S. 

as a whole, 

biannually for 

metro/nonmetro

aAnnually starting 2005 for counties with population of 65,000 or more, 3-year moving average for counties with population of 20,000 or more, 

5-year moving average for smaller counties. BEA = Bureau of Economic Analysis.