Does it pay to keep shops open in sparsely populated areas? A cost-benefit analysis of a hypothetical shop closure
✍ Scribed by Ernst Jonsson
- Book ID
- 104763137
- Publisher
- Springer
- Year
- 1983
- Tongue
- English
- Weight
- 1016 KB
- Volume
- 6
- Category
- Article
- ISSN
- 0168-7034
No coin nor oath required. For personal study only.
✦ Synopsis
If the only shop in a rural locality is closed down the households will be faced with increased purchasing costs and other welfare losses. On the other hand the closure of the shop would release labour and other resources (e.g., premises, fittings, and stocks). Consequently the economic result is equal to the difference between those costs and revenues (the alternative value of these resources) that do not arise if the shop remains open. Whether society as a whole gains or loses from a shop closure will depend in the first place on (a) how far the households have to travel to the nearest alternative shop; (b) how many households are effected by the closure; and (c) what value the resources thus released could have in an alternative use.
Those rural shops that received government investment support in Sweden are located on average 15 km from the nearest competitor and serve 100 households. The typical shop is also located in an area where there is a permanent shortage of jobs. According to the analysis of this paper, a proposed closure of such a shop would involve a social loss of approximately 130,000-140,000 SKR per year.