How Large are the Contributions of Cities to the Development of Rural Communities? A Market Access Approach for a Quarter Century of Evidence from Chile

Abstract

This article estimates the impact of cities on the economic development of rural communities in Chile, following a market access approach. The effect of the proximity to cities on the development of rural communities is analyzed by estimating the impact of market access on the population, and farm and non-farm employment of rural communities. Using population censuses and remote sensing data, we find, in our preferred estimations, that a 10% higher market access induced a 10%–14% increase in the population of rural communities. Additionally, higher positive elasticities are found in the non-farm sector rather than in the agricultural one. These results widely support the hypothesis of structural change and the diversification of the rural economy for rural communities with better access to markets. Notwithstanding, the evidence also suggests that the farm sector took important advantages from market access in places with better agro-ecological conditions.