Evidence from the Upper Midwest

Abstract. Concerns have been raised that potential retail activity is being lost in rural areas. This study examines the response of retail employ-ment and the number of retail establishments to changes in local em-ployment in isolated rural areas. Since many attempts to strengthen ru-ral retail activity focused on increasing market size by attracting manu-facturing activities, special a ttention is devoted to the empirical analysis of the manufacturing/retail relationship. Using data from the upper Midwest, a statistically significant association between changes in manu-facturing employment and resulting changes in retail employment was found. The stimulative impact of manufacturing employment on retail activity was found to be more consistent than other types of job growth. Manufacturing activity also stimulated new retail establishments. Com-petition from nearby metropolitan areas contributed to the difficulty ru-ral areas have in retail development and the difficulty may be increasing since the start of the analysis