Why investing more in the capital can lead to less growth

Lewis Dijkstra

Cambridge Journal of Regions, Economy and Society, 2013, vol. 6, issue 2, 251-268

Abstract: This article argues that investing in a wide range of city sizes, or a portfolio of places, can be more conducive to growth than primarily investing in the largest city. A range of cities allows each firm to find its optimal city. This reduces the needed size of cities and thus congestion costs. Less-developed European Union Member States have large and growing productivity gaps between their capitals compared with the rest of the country. More-developed Member States have much smaller productivity gaps. Therefore, growth in the second-tier cities in less-developed Member States is likely to outpace growth in the capital in the medium term, yet public investment may be too focused on the capital city. Copyright 2013, Oxford University Press.

Date: 2013
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Cambridge Journal of Regions, Economy and Society is currently edited by Judith Clifton, Anna Davies, Betsy Donald, Emil Evenhuis, Stefania Fiorentino (Associate Editor), Harry Garretsen, Meric Gertler, Amy Glasmeier, Mia Gray, Robert Hassink, Dieter Kogler, Michael Kitson, Linda Lobao, Charles van Marrewijk, Ron Martin, Peter Sunley, Peter Tyler and Chun Yang

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