Why size really doesn't matter: from megacity myths to place-sensitive prosperity

Andrés Rodríguez-Pose

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

Abstract: This paper offers a critical review and synthesis of the literature on the relationship between urban agglomeration, density, and regional prosperity. Agglomeration and density have long been portrayed as the core drivers of urban and regional success. Yet the evidence remains stubbornly inconclusive: some large cities flourish while others stagnate, and many smaller cities quietly outperform their sprawling counterparts. If density were destiny, the world’s largest cities would consistently lead in wealth and opportunity. However, they frequently do not. The paper argues that genuine sources of growth lie instead in institutional quality, the resilience of local ecosystems, and the strength of inter-territorial linkages. Conventional models have mostly dwelt on a narrow set of negative externalities —congestion, high rents, pollution— while overlooking deeper structural costs: territorial inequalities that erode trust, trigger discontent, and consign whole cities and regions to prolonged decline. As political and social fractures within countries widen, it is increasingly evident that prosperity hinges not on agglomeration itself but on the conditions of cities and their relationships with their hinterlands. The way forward requires a shift in policy and analysis towards place-sensitive strategies and robust institutions capable of promoting inclusive prosperity across all cities and regions, rather than privileging a select few.

Keywords: agglomeration economies; urban density; territorial inequality; institutions; regional development; geography of discontent; ecosystems; place-based policies (search for similar items in EconPapers)
JEL-codes: O18 P25 R11 R12 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2026-01-07
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Published in Spatial Economic Analysis, 7, January, 2026, pp. 1 - 16. ISSN: 1742-1772

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