The proposed poster aims at identifying the economic, social and political conditions un-der which rural regions succeed in overcoming locational and structural deficits and creat-ing new economic sectors as old ones decline. In addition it aims at developing policies that encourage the transformation process from lagging towards leading regions. For this purpose, a dynamic simulation model is developed. It captures the main feedback processes that run through the relevant theories and it is applied to two case study re-gions, one in Switzerland and one in Norway. Both regions have the potential for trans-formation because of planned infrastructure projects and economic activities. Economic development in the two regions faces questions of resource use, cultural dynamics, and the role of public policy. The application of the model to the two case study regions results in the identification of generic processes behind regional rural development and the requirements for a trans-formation from lagging to leading region. It is also possible to analyze the effectiveness of regional policy measures under a wide range of socioeconomic and political conditions.