Big or small cities? On city size and economic growth

Susanne A. Frick and Andrés Rodríguez-Pose

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: city size; economic growth; enabling factors (search for similar items in EconPapers)
JEL-codes: Q15 (search for similar items in EconPapers)
Date: 2018-03-07
New Economics Papers: this item is included in nep-geo, nep-gro and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published in Growth and Change, 7, March, 2018. ISSN: 0017-4815

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Related works:
Working Paper: Big or small cities? On city size and economic growth (2017)
Working Paper: Big or small cities? On city size and economic growth (2017)
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