AGRICULTURAL:ADJUSTMENT UNIT -!- LINIVERSITV-'0F NEWCASTLE UPON TYNE AVIodells of Population and income: Economic Planning in Rural Areas 41 ANNINIZ,FPUNDATiON OP ABRICULJ K. G. Willis Li " E., ECONOMICiit THE AGRICULTURAL ADJUSTMENT UNIT THE UNIVERSITY OF NEWCASTLE UPON TYNE In recent years the forces of change have been reshaping the whole economy and, in the process, the economic framework of our society has been subject to pressures from which the agricultural sector of the economy is not insulated. The rate of technical advance and innovation in agriculture has increased, generating inescapable economic forces. The organisation of production and marketing, as well as the social structure, come inevitably under stress. In February 1966 the Agricultural Adjustment Unit was established within the Department of Agricultural Economics at the University of Newcastle upon Tyne. This was facilitated by a grant from the W.K. Kellogg Foundation at Battle Creek, Michigan, U.S.A. The purpose of the Unit is to collect and disseminate information concerning the changing role of agriculture in the British and Irish economies, in the belief that a better understanding of the problems and processes ofchange can lead to a smoother, less painful and more efficient adaptation to new conditions. Publications To achieve its major aim of disseminating information the Unit will be publishing a series of pamphlets, bulletins and books covering various aspects of agricultural adjustment. These publications will arise in a number of ways. They may report on special studies carried out by individuals; they may be the result ofjoint studies; they may be the reproduction of papers prepared in a particular context, but thought to be of more general interest. The Unit would welcome comments on its publications and suggestions for future work. The Unit would also welcome approaches from other organisations and groups interested in the subject of agricultural adjustment. All such enquiries should be addressed to the Director of the Unit. Unit Staff Director: Professor J. Ashton, M.A., B.Litt, M.S. Head of Unit: S. J. Rogers, B.Sc.(Econ) Administrative Officer: B. H. Davey, B.Sc.(Agric), M.Econ The Agricultural Adjustment Unit, Department of Agricultural Economics, The University, Newcastle upon Tyne, NE1 7RU. MODELS OF POPULATION AND INCOME: ECONOMIC PLANNING IN RURAL AREAS K. G. WILLIS Research Monograph No. 1 AGRICULTURAL ADJUSTMENT UNIT UNIVERSITY OF NEWCASTLE UPON TYNE 1971 PREFACE This paper is the first of a new series of research monographs. In the course of its programme on policy questions affecting U.K. agriculture the Agricultural Adjustment Unit has moved into several areas of research where it has judged additional work to be necessary. As a result of these activities points of methodo- logical interest are emerging, which, although they are intended to bear on policy questions, are theoretical. This series ofresearch monographs is intended to improve analytical tools to handle the complex problems of agricultural and rural policies. It has become increasingly apparent that, on some issues, agriculture and agri- cultural policy are only contributory elements in the complex of rural affairs. This is particularly the case when considering some ofthe remoter areas ofthe U.K. These are areas where any move to a more efficient agriculture can result in accelerating depopulation and where long-term viability of the whole rural community is in question. In these cases it is appropriate to re-state the adjustment problem in terms of rural societies rather than agricultural communities and in terms of the rural economy as a whole in which agriculture, although important, is not the sole industry. In an enlarged E.E.C. the subject of rural communities and regional development will loom even larger in the thinking of those concerned with agricultural matters. In practice, the solution to the problems of remote areas is often likely to be beyond the capacity of any agricultural policy and will involve other economic and social measures. It was with these thoughts in mind that the Agricultural Adjustment Unit mounted a Conference at Aviemore in October 1969, the proceedings of which are being published for the Unit by Oliver and Boyd early in 1972 under the title 'The Remoter Rural Areas of Britain'. This conference demonstrated that there was widespread interest in the problems of remoter areas, and led the Adjustment Unit into research programmes in this general field. One factor, apparent from the beginning, was that although the remote areas have some similarities they also have profound differences. Consequently the combination of policies which may be appropriate for one region may be in- appropriate for others. As a starting point it is therefore necessary to classify remote areas by some means. Key factors in such an analysis are likely to be the expected changes in population and the levels ofincome within the geographical area being considered. Dr. K. G. Willis has been working on these problems since April 1970 and this monograph represents the first results of his work. Dr. Willis explores the methods of population projection and the measurement of income and concludes broadly that, although published statistical sources may be indicative, there is not 3 sufficient information available to enable accurate diagnosis of problems to be made. In consequence, interest in this monograph should focus on the methodo- logical aspects, rather than the results generated for the North of England, which can only be regarded as first approximations. Two further stages are currently envisaged for research in this field. Firstly, there is need to refme the methods of projecting population and measuring rural income. Secondly, there is a need to examine the objectives applicable to rural areas and the range of policies which could be implemented to achieve them. This monograph can be regarded as the Agricultural Adjustment Unit's first effort in what may prove to be a long research programme. In the course of its preparation assistance was received from Mr. M. C. Whitby, who is generally responsible for this field of research in the Unit and to whom acknowledgement is made. Finally, since this monograph hopes to stimulate discussion, the Agricultural Adjustment Unit would welcome the views of readers on any of the matters discussed. J. ASHTON November 1971 MODELS OF POPULATION AND INCOME: ECONOMIC PLANNING IN RURAL AREAS CONTENTS Page 1. Introduction .. • • • • • • • • • • • • • • • • 7 2. Methods of Population Projection and Income Estimation .. • • 12 Methods of population projection .. • • • • • • • • 12 Population projection—applicability to rural areas .. • • • • 13 Assumptions .. • • • • • • • • • • • • • • 18 Methods of estimating income • • • • • • • • • • 20 3. Population Projections and Income Estimates in the Northern Pennines 24 Population trends • • • • • • • • • • • • 24 Income estimates, earnings and Inland Revenue data • • • • 27 4. Problem Area Identification • • • • • • • • • • • • 31 5. An Econometric Study ofIncome and Labour .. • • • • • • 36 6. Summary and Conclusions.. • • • • • • • • • • • • 43 Appendix 1. Cohort-survival formulae in population projections • • 47 Appendix 2. Population projection as a stochastic process .. .. • • 49 Appendix 3. Population projection, 1991, by local authority area and quinary age and sex groups .. • • • • • • • • 50 Appendix 4. Estimates of earnings and incomes by parish .. 54 Appendix 5. Classification of parishes by type of problem area • • • • 60 References and Notes .• • • • • • • • • •. • • • • 62 5 1. INTRODUCTION The object of this monograph is to develop information and techniques of analysis which can be used to make a better evaluation ofthe regional economy in remoter rural areas, with the aim of making policy formulation and direction more effective and efficient. It focuses initially on two areas currently of great interest to planners and policy makers concerned with rural areas: population and income. The remote upland areas of Britain have felt and continue to feel the chilly winds of economic pressure. The economies of such marginal areas continue to decline despite the injection of large amounts of capital to aid farming, industry and the social environment. The greatest capital flow into sectors directly concerned with the production ofeconomic goods has been to farmers in these hill and upland areas. The present grants to agriculture in upland areas comprise: hill cows(13.7 million for 1970-71); hill sheep (k8.5 million); winter keep ( 4-.19 million); beef cows(5.8 million) and hill land improvement(k2.2 million). In addition, million was paid in 1970-71 under the old Livestock Rearing Act grants. These grants, in total, amount to well over 30 million. Upland farmers also benefit from such other schemes as the Farm Improvement Scheme and drainage grants but the payments cannot be separately identified. However, Bulletin 13 of the Agricultural Adjustment Unit on Hill Sheep Farming* looked at government support measures in 1967-68 and estimated the share of other support to hill and upland areas to be equal to direct recorded support. Under the objectives of the 1947 Agriculture Act,' this investment is designed to promote an efficient agri- cultural industry with proper renumeration for workers in agriculture. However, the question should be asked, could this money be better utilised in alternative investment projects in these remote rural areas ? How effective is the agricultural