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Romes without Empires: Urban Concentration,Political Competition, and Economic Growth

  • Cem Karayalcin

    ()

    (Department of Economics, Florida International University)

  • Mehmet Ali Ulubasoglu

    ()

    (Faculty of Business and Law, Deakin University, Victoria 3125, Australia)

Many developing economies are characterized by the dominance of a super metropolis. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate di?erent mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by different interest groups (localized in di?erent specialized cities/regions) will lead to low investment and growth when the number of such groups is small. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized in relatively few urban nodes, tax rates would be higher and growth rates lower. Our empirical work exploits the connection between urban wealth (with the political power it affords) and national soccer championships. By using a cross-country data set for 103 countries for the period 1960-99, we ?nd strong and robust evidence that countries with higher concentrations in urban wealth¨Cas proxied by the number of di?erent cities with championships in national soccer leagues¨Ctend to have lower long-run growth rates.

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File URL: http://casgroup.fiu.edu/pages/docs/3501/1314461938_11-08.pdf
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1108.

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Length: 63 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:fiu:wpaper:1108
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