The Size Efficiency of Rural Governments: The Case of Low-Volume Rural Roads

The deterioration of the supply of public infrastructure throughout the United States has been found to be accelerating. The reason most often cited for the increasing rates of deterioration is the lack of available funding, or fiscal stress, present in many local governments. A popular short-term solution to fiscal stress is to defer infrastructure repairs and/or replacement programs. This is particularly true in rural areas where a declining agricultural base and redirected federal policy have placed significant downward pressure on revenues. The search for a long-term solution has renewed the debate about the optimal size of local governments. The research reported here examines the issue of size efficiency in the production of low-volume rural roads in the Midwest. At issue is the ability of Midwest townships to realize size economies. Overall, size inefficiencies were identified which suggests that cost savings may be realized from the reorganization of the production of low-volume road services.