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Concentration of Population in Capital Cities: Determinants and Economic Effects

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  • Rodrigo Cifuentes S
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    Abstract

    This paper studies the impact and determinants of the concentration of population in capital cities across countries. Fast population growth in capital cities is a widespread phenomenon that does not seems to be explained by economic factors. In addition, this fact violates Zipf’s law, a strong empirical regularity in the distribution of city sizes. The paper addresses first the impact of this fact on economic growth. A model is built to study the consequences of distortions in the spatial allocation of resources in production. The empirical results show a negative correlation between this distortion and economic growth. The second part of the paper studies the determinants of this phenomenon. Three hypotheses advanced in the literature are tested. The results show that trade barriers do not explain concentration in capitals, nor does political instability. Both results are robust and oppose previous findings in the literature. This paper finds support to the hypothesis that concentration in capitals can be explained by weak political rights in the population.

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    File URL: http://www.bcentral.cl/estudios/documentos-trabajo/pdf/dtbc144.pdf
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    Bibliographic Info

    Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 144.

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    Date of creation: Feb 2002
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    Handle: RePEc:chb:bcchwp:144

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
    3. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
    4. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
    5. Ades, Alberto F & Glaeser, Edward L, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 195-227, February.
    6. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
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