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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

How to Boost Urban-Rural Exchanges: Creation of New Value for Rural Areas

How to Boost Urban-Rural Exchanges: Creation of New Value for Rural Areas

MIN Seung-Kyu, KANG Shin-KyumCHO Yeon-HeeSHIM Chang-SeopCHOI Kyung-Seung

Jan. 23, 2007

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Rural households are facing increasing economic difficulties, particularly mounting debts. Farmers' average income is far below the national average. In contrast to industrialized countries where farmers have relatively high income levels, Korea's average rural household income was only 88.2% of the national average in 2005. Over the past 20 years, agricultural sector's per-family debts expanded over ten times, dealing a fatal blow to rural households.

The agricultural population has notably declined as rural residents have sought other occupations or migrated to urban areas. Worse yet, existing rural residents are aging rapidly leading to a dearth in younger workers In the course of its economic development, Korea pursued an urban-centered development policy, thus widening existing gaps in income and living standards. Since the 1980s, the income gap has widened further as farm households' income growth remained stagnant. As of 2005, agricultural households' average income was roughly 78% of urban families.

As Korea pursues greater economic openness through free trade agreements and the Doha Development Agenda (DDA), a deep sense of crisis currently pervades the countryside. For example, once the Korea-US FTA is signed, some of the less competitive farming segments will be adversely affected. The agricultural industry is strongly opposed to any market opening based on an assumption that it would devastate already struggling farmers.

Under these circumstances, rural areas' need to find new growth opportunities such as those offered by the "urban-rural exchange." Agricultural families need new opportunities to increase their non-agricultural income. As rural areas are typically envisioned as idyllic refuges with the opportunity to experience new things, urban residents have revived interests in rural areas. The "urban rural exchange" makes it possible for both areas to pursue mutual interests based on respective strengths. Particularly regarding rural areas, this exchange has helped local economies attract both residents and investments.

The exchange agenda covers nearly all resources, regardless of whether they are tangible or intangible. The urban-rural exchange also offers a wide range of benefits to citizens, including opportunity to vacation, study and purchase fresh agricultural products. Farmers are able to expand sales channels, boost earnings and access new information.

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