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The cost of non-rurality: towards an assessment?

Jul 17, 2023 | Blog, EU institutions

Author: Carla Lostrangio & Leticia Abarca (AEIDL)

In 2022, the 8th Cohesion Report of the European Commission warned about the widening gap between urban and rural areas. Territorial imbalances and territorial divides in several European countries are indeed on the rise and challenging the social, economic, and territorial cohesion principle stated by the European Treaties, resulting in the so-called geography of discontent. With this respect, a new report has recently been published to shed light on the cost of non-rurality.

Commissioned by the NAT Committee of the European Committee of Regions, this report (“The cost of non-rurality – preparing for a better urban-rural balance in EU funding”) was written by Jorge Núñez Ferrer, Tamás Kiss-Gálfalvi, Doina Postica (CEPS), Izabela Marcinkowska and Karolina Zubel (CASE). The report aims to “contribute to the debate on EU rural development policy by presenting a methodology to understand the net costs and benefits of investing in rural areas to society as a whole”.

What is it and how to measure the cost of non-rurality

The concept of the “cost of non-rurality” is defined in the report as the estimated expenses associated with the imbalances between rural and urban territories. The report assumes that the decline of rural areas and the increasing urbanization have generated a range of advantages over the past century, such as the concentration of resources and economic activities. However, these processes also come with costs that affect both rural and urban areas. For example, the report highlights that the decline and migration of populations from rural to urban areas also result in negative impacts on the broader economy, particularly on urban areas that bear the burden of accommodating the influx of rural populations.

Consequently, the report argues for a comprehensive evaluation of the net cost of territorial imbalances, considering both the negative and positive externalities associated with rural decline. The measurement of the cost of non-rurality is approached schematically in the report, with a diagram illustrating the calculation of the net cost as the difference between the opportunity costs of agglomeration and the negative externalities stemming from rural decline. The document provides a list of costs and benefits to assess the net cost of non-rurality.

While the authors do not provide a complete calculation of the net cost of non-rurality, they apply the suggested methodology to examine the net costs of agglomeration and its impact on inequality. Their analysis reveals that some of the costs related to agglomeration include “congestion costs” associated with traffic and pollution, typically observed in densely populated cities, as well as the excessive burden of housing costs. In 2018, the costs of pollution and environmental pressure in Europe amounted to EUR 166 billion, and during that year alone, each urban resident experienced a welfare loss of approximately EUR 1,250.

Source: Extracted from “The cost of non-rurality” (2023)

Conclusion

The report’s main conclusions highlight the insufficient data and research available to comprehensively evaluate the opportunity costs associated with rural decline. It emphasizes the need to consider not only the economic aspects but also the social and environmental dimensions when understanding the overall implications of rural decline on both rural and urban territories. Thus, investment in rural development should be designed through the identification of the costs and benefits of current trends, allowing for win-win situations to emerge. Estimating these costs and benefits is a necessity for cost-effective answers yielding overall socio-economic returns.

A realistic assessment of these costs would greatly enhance the design of rural policies. It would enable the implementation of more targeted interventions and structural changes aimed at addressing territorial imbalances. This may involve prioritizing investments that strengthen services or create job opportunities in rural areas, thereby promoting the long-term development of these territories.

More information

The full report can be accessed at this link. Ongoing initiatives like the Horizon Project CODECS are utilizing the methodology of cost and benefit analysis of rural digitalization to gain a deeper understanding of how to enhance conditions in rural areas, consequently bringing about socioeconomic advancements.

Furthermore, CODECS strives to advance the concept of sustainable digitalization, aligning with the findings of the “cost of non-rurality” study that emphasize the significant role of emerging technologies in transforming rural areas for the better.

To stay informed about the progress of CODECS, we recommend subscribing to its newsletter, ensuring you receive the latest updates.

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