Measuring Policy Impacts on Rural Regions

Current global trends (globalization, environmental protection, consumer demand for food safety and quality) constitute major challenges for the European rural economy as more than 80% of EU territory is rural. Thus, EU policies are oriented towards rural economies aiming at greater integration and economic development. Different rural development policies are devised to improve the socioeconomic structure of rural areas and enhance local economic activity. These actions encompass a vast number of interventions in public and private sector in order to facilitate income and employment enhancement. Both employment and income increase is the ultimate objective in a world that employment is shrinking and sequentially the entire rural economy may be brought at the edge of total disarrange. Social and economi c changes in rural areas are not only rest on the initiated CAP policies, but also on the linkages among different activities and the interdependence among economi c sectors in the region. Studies concerning rural areas in various EU countries revealed that diversified local economies performed better than economies totally depended on agriculture. Most of these studies employ InputOutput (I-O) analysis, as I-O methodology offers the opportunity to examine in details the structure of the economy (either local or national), to assess interrelations among the various economic sectors, to measure direct and indirect economic impacts, and to evaluate the performance and effectiveness of applied policies. I-O analysis, introduced and developed in the late 1930s by Wassily Leontief, is a generaI equilibrium approach that studies the interdependence among interrelated economic activities and sectors. In its basic form an I-O framework consists of a system of linear equations, which describes in detail the distribution of a sector's product sales and input purchases. I-O analysis, as a quantitative tool, contributes substantially to the understanding of the nature of a national or a regional economy and the followed patterns in rural development. I-O analysis is perfectly suited for impact and structuraI studies, for projections of economic activity and for tracing technical change. Nevertheless, when I-O analysis