Far-from-sight and expensive: additional costs of public services in rural areas

Countries reap numerous benefits from maintaining rural communities. Those advantages, however, come at a cost. We examine the additional costs of public services in rural areas in Israel by considering sparsity, population size and density, distances, and socio-economic status of rural residents. We quantify the effect of these factors and find that the cost of providing public services in rural areas is 39% greater than in cities. Density and other structural differences contribute 20% to the added cost. Economies of scale contribute 8.2%; peripheral location 4.2%; and socio-economic status 2.6%. We show that population density moderates the relation between population size and per-resident expenditure. We also demonstrate that more rural villages in an area increases per-resident expenditure and moderates the relation between distance and expenditure. We discuss policy implications and suggest contributions to a deeper understanding of the rural public economy.