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

Local Government Studies. 2025. No. 51. P. 799–822.

Vigoda-Gadot E., Shani R., Reingewertz Y.

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

Keywords: economies of scale, local government, Rural cost penalty, rural public finance, economies of density

Publication based on the results of: Citizen-state interaction in the context of digital transformation: Political, psychological, and managerial factors and barriers (2025)