PIERRE, S.D. (AP) -- Small farm towns hoping to stem decline should develop clusters of businesses and attract young people back to America's rural areas, a University of South Dakota economist said.

Randall Stuefen, of the university's Business Research Bureau, pointed to California's Silicon Valley, where high-tech companies attract a skilled work force and profit by doing business with one another.

In the past, small-town businesses served farmers and the employees of other businesses, said Stuefen. As technological advances reduced the number of farmers, small towns also lost businesses and population.

Rural areas cannot base new business clusters on retired people because the declining number of farmers will not supply enough retired people to support small towns, Stuefen told the annual conference of the South Dakota Housing Development Authority.

The larger cities must provide an educated work force, education and research, sources of finance, a network of suppliers and a good quality of life to make sure they maintain their manufacturing and communications industries, Stuefen said.

Nearly three-quarters of South Dakota's population growth in the 1990s occurred along Interstate 29 and around Rapid City, Stuefen said. Farming communities in the middle of the state shrank.

Agricultural processing holds great promise for rural areas, but rural residents also must pay attention to the environment, the economist said. Visitors want rural areas to look and smell good, he said.

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