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Big or small cities? On city size and economic growth

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  • Susanne A. Frick
  • Andres Rodriguez-Pose

Abstract

Policy-makers and academics frequently emphasize a positive link between city size and economic growth. The empirical literature on the relationship, however, is scarce and uses rough indicators for the size for a country's cities, while ignoring factors that are increasingly considered to shape the relationship. In this paper, we employ a panel of 113 countries between 1980 and 2010 to explore whether (1) there are certain city sizes that are growth enhancing and (2) how additional factors highlighted in the literature impact the city size/growth relationship. The results suggest a non-linear relationship which is dependent on the country's size. In contrast to the prevailing view that large cities are growth-inducing, for the majority of countries relatively small cities of up to 3 million inhabitants are more conducive to economic growth. A large share of the urban population in cities with more than 10 million inhabitants is only growth promoting in countries with an urban population of 28.5 million and more. In addition, the relationship is highly context dependent: a high share of industries that benefit from agglomeration economies, a well-developed urban infrastructure, and an adequate level of governance effectiveness allow countries to take advantage of agglomeration benefits from larger cities.

Suggested Citation

  • Susanne A. Frick & Andres Rodriguez-Pose, 2017. "Big or small cities? On city size and economic growth," Papers in Evolutionary Economic Geography (PEEG) 1725, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Sep 2017.
  • Handle: RePEc:egu:wpaper:1725
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Bigger Isn’t Necessarily Better When It Comes to City Size
      by ? in CityLab on 2017-12-14 23:57:00

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    Cited by:

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    2. Andrés Rodríguez-Pose & Michael Storper, 2020. "Housing, urban growth and inequalities: The limits to deregulation and upzoning in reducing economic and spatial inequality," Urban Studies, Urban Studies Journal Limited, vol. 57(2), pages 223-248, February.
    3. Frick, Susanne A. & Rodríguez-Pose, Andrés, 2018. "Change in urban concentration and economic growth," World Development, Elsevier, vol. 105(C), pages 156-170.
    4. Olivier Bouba-Olga & Michel Grossetti, 2018. "La mythologie CAME (Compétitivité, Attractivité, Métropolisation, Excellence) : comment s’en désintoxiquer ?," Working Papers hal-01724699, HAL.
    5. Jorge Diaz-Lanchas & Raymond J.G.M. Florax & Peter Mulder, 2019. "Does decentralization of governance promote urban diversity? Evidence from Spain," JRC Working Papers on Territorial Modelling and Analysis 2019-07, Joint Research Centre (Seville site).
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    7. Rodr�guez-Pose, Andr�s, 2017. "The revenge of the places that don't matter (and what to do about it)," CEPR Discussion Papers 12473, C.E.P.R. Discussion Papers.
    8. Seyed Peyman Asadi & Ahmad Jafari Samimi, 2019. "Lagging-behind Areas as a Challenge to the Regional Development Strategy: What Insights can New and Evolutionary Economic Geography Offer?," Papers in Evolutionary Economic Geography (PEEG) 1923, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jul 2019.
    9. Mitra, Arup & Nagar, Jay Prakash, 2018. "City size, deprivation and other indicators of development: Evidence from India," World Development, Elsevier, vol. 106(C), pages 273-283.

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    More about this item

    Keywords

    city size; economic growth; enabling factors;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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