_Rural-urban gradient in Latin America and the Caribbean_ _page_ 2 obviously different. So it is natural to seek a binary indicator of rural vs. urban location and to use it for analytic and policy purposes.

There is no international standard for making this dichotomy, and indeed the United Nations argues that “given the variety of situations in the countries of the world, it is not possible or desirable to adopt uniform criteria to distinguish urban areas from rural areas” (United Nations 2002, p. 106). Accordingly, the official United Nations statistics on urban and rural populations are based on the inconsistent national standards.

Table 1 reproduces the United Nations’ compilation of rurality estimates for most LAC countries, together with the national criteria for urban areas. Almost all countries have adopted an urban classification related to the size or characteristics of settlements. Some use a minimum population, typically 1500 to 2500 people; others designate as urban the administrative seat of a municipio or equivalent; others use as criteria the presence of infrastructure such as paved roads, street lights, schools and medical facilities.

On reflection, however, it is clear that an urban/rural dichotomy is an oversimplification. The two emblematic images – isolated farm, thriving metropolis -- represent poles on a continuum. Life changes along a variety of dimensions, as one journeys from the most remote forest outpost through fields and pastures, past tiny hamlets, through small towns with weekly farm markets, into intensively cultivated areas near larger towns and small cities, eventually reaching the center of a cosmopolitan megacity. The changes may sometimes be abrupt, more often gradual. Agriculture declines as a source of income and employment. Land uses tend to shift, as von Thünen described, from forestry to pasture to crops to vegetables, becoming more intensive as larger cities are approached. The proportion of indigenous people may decrease, reflecting historical patterns of settlement or exclusion. Access to infrastructure, to social services and to nonfarm employment all increase, and with them population density and incomes. Along this continuum from urban to rural, the village of 1500 people – the typical statistical office’s threshold of urbanity – is arguably closer to the rural pole than the urban, and probably embraces many settlements that are physically and economically embedded in agricultural landscapes.

Here we propose that operational definitions of rurality can be based on two main criteria or dimensions: population density, and distance to large cities (those with populations greater than 100,000). Population density is an important criterion both for economic behavior and for development policy. Population density drives the agglomeration economies that are defining feature of cities (though urban transport, infrastructure, and amenities also bear on those economies). Population density also strongly affects the unit costs of a variety of public and private investments related to development. Economies of density arise either because of fixed facility costs, or as a result of higher mean travel costs to reach households. There are for instance economies of density in the provision of elementary education, public health, agricultural extension, grid linked electricity, and feeder roads. Low population density areas may be too small to support competition in some product and service markets (especially transportation), leading to capture by local monopolies. Each of these consideration may have a different relationship with density, and with other factors, making it difficult to designate a unique urban-rural cutoff density. As a reference, however, Bollman and Bryden (1997, p.9), cite OECD adoption of 150 people/km<sup>2</sup> as the urban threshold.