City Size and Economic Performance: Is Bigger Better, Small More Beautiful or Middling Marvellous?

Abstract

This article discusses the contribution that second-tier cities can and do make to the economic performance of national economies across Europe. It reviews the competing theories about size, investment and economic performance. It presents a range of evidence about the performance of over 150 European capital and second-tier cities in 31 countries. It identifies some key policy messages for local national and European policy-makers. It presents evidence that decentralizing responsibilities, powers and resources, spreading investment and encouraging high performance in a range of cities rather than concentrating on the capital city produces national benefits. It argues that in a period of austerity national governments should resist pressures to concentrate investment in capital cities and invest more in second-tier cities when there is evidence that: (i) the gap with capitals is large and growing (ii) the business infrastructure of second-tier cities is weak because of national underinvestment and (iii) there is clear evidence about the negative externalities of capital city growth. It argues that the issues have slipped down the European Commission's agenda and it should do more to ensure its strategies help realize the economic potential of second-tier cities in future.