The Political Geography of Cities
Abstract
We study the link between regional capitals and urban development. We exploit new global data on hundreds of first-order administrative and capital city reforms from 1987 until 2018 to estimate the capital city premium. Gaining capital status increases city growth in the medium term, spilling over to nearby cities. The capital premium varies with the size of the territory governed by the city, and political status complements favorable economic fundamentals. We document two mechanisms: migration of educated individuals to capital cities and heightened public and private investment, with private investment favoring capital cities with stronger economic fundamentals. (JEL D72, E22, H54, O18, R11, R12, R58)
Fields of Study & Subjects
Regional Economics and Spatial Analysis
Fiscal Policy and Economic Growth
Local Government Finance and Decentralization
Publication details
- Journal / source
- American Economic Journal Applied Economics
- Publisher
- American Economic Association
- Volume
- 18
- Issue
- 3
- Pages
- 1–42
- Publication date
- 26 June 2026
- Language
- EN