The Impact of Urban Concentration on Economic Growth: An Empirical Investigation for a Sample of Countries

Abstract

Researchers have recently shown widespread interest in the urban concentrations and the resulting economic impacts on global cities. Opinions differ among researchers as some believe in the existence of such effect while the others do not. The study investigates the impact of urban concentration on economic growth by using panel data for 16 countries during 1970-2014. In order to verify the strength of the results, this paper uses two measures for urban concentration, namely urban primacy and urban density. Results show that urban concentration has a positive impact on economic growth and no evidence was found that support the non-linear effect of urban concentration on economic growth. This finding supports many previous empirical studies that highlight the importance of agglomeration economies on economic growth.

The relationship between city size, decentralisation and economic growth

“…This suggests that as a country's weighted average city size increases, it also experiences faster growth rates of GDP per capita, providing support for our first hypothesis. This finding is consistent with Frick and Rodríguez-Pose (2016, 2018) and Al-Jebouri et al. (2020) suggesting that economies can benefit from larger urban agglomerations.…”

“…The dynamics of local infrastructure, localised scale economies, matching of skills, suppliers, markets and labour are also explored to identify what makes cities more productive (Duranton and Puga, 2004). Al-Jebouri et al. (2020) emphasises that firms locate near pools of labour and that people choose to locate close to employment opportunities.…”

“…The dynamics of local infrastructure, localised scale economies, matching of skills, suppliers, markets and labour are also explored to identify what makes cities more productive (Duranton and Puga, 2004). Al-Jebouri et al (2020) emphasises that firms locate near pools of labour and that people choose to locate close to employment opportunities. This forms the basis of urban concentration and thus increased activity due to proximity to commercial activities and local demand, leading to increased economic growth.…”

“…The United Nations (2019, p. 3) highlights that urbanisation is characterised by an "increasing share of economic activity and innovation becom [ing] concentrated in cities". This urbanisation-growth nexus has led to growing interest in the relationship between city size and economic growth (Al-Jebouri et al, 2020;Alvarado et al, 2020;Zheng and Walsh, 2019). Recent research suggests city size is positively associated with economic growth in high-income countries (Frick and Rodr ıguez-Pose, 2018;Gollin et al, 2016).…”

“…The United Nations (2019, p. 3) highlights that urbanisation is characterised by an “increasing share of economic activity and innovation becom [ing] concentrated in cities”. This urbanisation–growth nexus has led to growing interest in the relationship between city size and economic growth (Al-Jebouri et al. , 2020; Alvarado et al.…”