Urban–Rural Development in Sweden

Economic activities are confined to urban metropolitan areas in developed countries. The service sector oriented both towards consumers and producers comprises of a substantial part of the economy and, in general, these sectors are dependent on access to regional purchasing power. Jane Jacobs (1969) stressed the importance of urbanisation as an explanation for economic growth when she argued that the diverse economy in urban regions stimulate innovative activities. Thereby urban diversity is likely to cause productivity to increase and promote economic growth. In Jacobs (1984) seminal book “Cities and the Wealth of Nations” she argued that metropolitan regions and urban economies serve as the backbone and engine of the wealth of nations, not vice versa. The cause and effects of urbanization have received a great deal of attention within the endogenous growth theory. For e.g., Lucas (1988) recognizes the way metropolitan regions serve as engines for economic growth because of localized information and knowledge spillovers. In models of endogenous growth, accumulation of human capital and knowledge is understood to explain economic growth (Romer 1994). This means that the regional market size by itself, and hence, the process of urbanization influences the growth of the economy. Growth and urbanization are analyzed in models where workers’ and households’ are allowed to migrate between regions. The seminal core-periphery model attributed to Krugman (1991) represents a type of model that is widely referred to within this field of study that allows us to consider both rural and urbanized regions in one model. As pointed out by Fujita and Thisse (2002), since the “new” theories of growth and “new economic geography” rest on the same modeling framework of monopolistic competition, there is a solid foundation of cross-fertilisation between the two fields of study.