UNU-MERIT Working Papers Series
The political geography of cities
Richard Bluhm, Christian Lessmann & Paul Schaudt #2021-039We study the link between subnational capital cities and urban development
using a global data set of hundreds of first-order administrative and capital city
reforms from 1987 until 2018. We show that gaining subnational capital
status has a sizable effect on city growth in the medium run. We provide
new evidence that the effect of these reforms depends on locational
fundamentals, such as market access, and that the effect is greater in
countries where urbanization and industrialization occurred later.
Consistent with both an influx of public investments and a private
response of individuals and firms, we document that urban built-up,
population, foreign aid, infrastructure, and foreign direct investment
in several sectors increase once cities become subnational capitals.
Keywords: capital cities, administrative reforms, economic geography,
urban primacy
JEL Classification: H10, R11, R12, O1
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