Is The Cost Of Living Less In Rural Areas?

Abstract

There seems to be a general presumption that rural areas benefit from lower costs of living than urban areas. However, there is relatively little systematic data, other than anecdotal evidence, to support this. To test this presumption, this study develops spatial cost of living estimates for each of the sixty-seven counties of Pennsylvania. In addition to the overall cost of living, it generates indexes for each of six component subindexes: groceries, housing, utilities, transportation, health care, and miscellaneous goods and services. These estimates find that the average urban resident of Pennsylvania pays about 6 percent more than rural residents for a broad basket of goods and services. Moreover, urban residents pay more on average for all six major categories of goods, with the greatest difference (12.7 percent) occurring for housing costs. Interestingly, the article also finds that the efficiency of the local public sector can affect local cost of living. The article also identifies policy implications of these differences for economic development and other purposes.

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