In the modern world, most residents only know a few people in big cities while in the past, villagers in a small community knew each other. So, there were some advantages and disadvantages for this old trend.
I believe there were two main benefits. First of all, living in a small village could give people opportunities to help each other. For example, in emergency cases like burnt house or thefts, etc. they absolutely tried to save others. Also, the way people gathered in a small area that could create traditional career villages for hand-made products, fishing and so on.
On the constrast, there were also some drawbacks. Firstly, young people in small villages could be restricted by narrow and biased views. They could not access education and advanced knowledge. Secondly, they only knew a few people which prevented them from building more relationships that can be useful for a better and brighter future.
In my opinion, there were as many advantages as disadvantages. So, nowadays, it depends on the preferences. People who want to recieve more cares from others and enjoy the peaceful ambience that will choose to live in small villages on the outskirts.