Social welfare, internal and external economies for integration of public services

In population declining countries, public services in rural areas face potential problematic issues on the long-run sustainability, which are namely brought by insufficient economies of scale. Since these services play important roles as social infrastructure elements, a disappearance from the society causes more population declines in rural areas. An attempt is made in this paper to examine long-run sustainable rural economic growth by restructuring social infrastructure elements. The first of three parts of the paper considers a model, which a part of social infrastructure elements may have an integrated operation. There is a top hierarchy that is treated as headquarter of the operation, and the following hierarchy needs to be allocated in an appropriate number of establishment. The hierarchical system can be approached by the framework of central-place theory, in particular, market-area analysis. The relevant notion may be the criterion of functional structure of space. In the second part, the hierarchical managerial structure of public services is evaluated by involving various effects of internal and external economies which are categorised in terms of scale, scope and complexity. If these are spatially-constrained, the notion becomes agglomeration economies. While the concept of agglomeration economies has been used for location decision-making of the firm or industrial organisation issues, the idea also can apply to the structure of business administration of public services. These services are necessary to sustain but there are various areas where those need to be reduced or eliminated due to insufficient demand level by population declines. Since they should be sustainable in an appropriate scale, scope and complexity, theoretical analysis may provide important implications. In particular, operational integration can be a main keyword to consider a case argued above, which is relevant to the criterion of administrative structure. The final part considers policy and practice in a realistic case which may have certain difficulty between the integrated organisation and transportation costs. Under such circumstances, the outcome is expected to show that population declining nations are necessary to maximise the opportunity of interregional cooperative arrangements, particularly for public services. It is also indicated that an enhancement of interregional cooperative arrangement can relax a potential difficulty of systematic restructure of public services as well as enhancing rural population growth. Theme: R Location theories and studies JEL Classification: D24, L38, O18, R12 Keywords: Agglomeration economies, transportation costs, central-place system, administrative and functional structures