Density and the Cost of Municipal Public Services in Brazil, Chile, Ecuador, and Mexico

Dense cities are a rational choice for the increasingly urban world, where concerns about environmental sustainability and urban sprawl are paramount (UN-Habitat, 2012). Among their many advantages, dense cities help preserve fertile rural lands, decrease overall commuting lengths, and contribute to reductions in greenhouse gas emissions. Along with its environmental benefits, density correlates positively with human capital accumulation, a higher rate of inventions, labor productivity, and social inclusiveness. On these grounds, and as development policies finally integrate environmental and social goals, urban policies are pushing for densification in both developed and developing countries.

While these are important benefits, we should also acknowledge the cost of density. Do dense municipalities have better coverage of basic services? How does density impact the per capita expenditure of these services? In this paper, authors de Duren and Compean focused on how urban density impacts per capita municipal spending on public services. The authors modeled public service spending as a function of its demand and cost, considering actual coverage levels. They apply the model to a panel of approximately 8,600 municipalities in Brazil, Chile, Ecuador and Mexico for years 2000 and 2010 (for a total of nearly 17,000 observations) for three basic services— water, sewage, and waste collection.

Results of the study provide strong policy support for densification, particularly for medium-sized cities in developing countries, which are currently absorbing most of the world’s urban population growth. The fact that density increases per capita public service spending in highly dense urban areas underscores that growing cities need growing resources. Tools for promoting density—such as master plans—should be reconsidered in light of their impacts in other dimensions, as well as the delay between their publication and actual implementation. It would be more effective to promote density by increasing the quality and access to urban services.

Read the full paper here.

de Duren, N. and Roberto Compeán (2015). “Density and the Cost of Municipal Public Services in Brazil, Chile, Ecuador, and Mexico.” IDB Working Paper Series No. 634. Inter-American Development Bank, November 2015.