Geography Reference
In-Depth Information
7.5.1
City Size and Productivity
While clear trends towards global regionalism, rather than simply globali-
zation, are emerging, traditional economic geography theory based on the
Marshallian tradition often emphasizes the importance of local and urban
scale as a driver of productivity advantages, for all of the reasons discussed
in Chapter 5. In terms of the location strategies of multinational firms, we
therefore have to ask where will MNEs locate in the areas in which they
are regionalizing?
Large cities provide increased opportunities for a wide range of sharing,
sorting and matching mechanisms to operate, which increase the overall
efficiency of the local activities. Indeed, estimations using US data suggest
that a doubling of city size is associated with something of the order of
a 5‒7 per cent increase in productivity. As such, there is still clearly a
very important role for large cities in the industrialized world in terms of
driving productivity (Rosenthal and Strange 2004). However, when we
consider issues of globalization and the potential advantages of different
locations for MNEs, the relationship between city size and productivity is
nowadays much less straightforward, and this is particularly so for most
advanced countries.
In order to see this we can first compare the largest fifteen cities in the
world at the turn of the millennium and compare these with the largest
fifteen cities in the early part of the twentieth century. As we see in
Table 7.1, all of the world's largest cities in 1925 were located in the world's
richest countries. Cities clearly played the role as the internal 'engines' of
the economy, in which urban scale and productivity were intrinsically
interconnected, exactly as Marshall (1890) suspected. Yet, today, the
largest cities in the world are all in developing economies, except for those
located in USA, Japan and Korea. As shown in Table 7.2, apart from the
case of these three countries, none of the world's largest cities is located in
an advanced economy. As such, during the twentieth century something
appears to have changed.
It is still very much the case that the world's most productive cities are
currently located in the world's most productive economies. As we see in
Table 7.3, 14 of the world's 15 highest per capita productivity cities - so
defined in terms of GDP per capita - are located in the USA; London,
which is ranked 13th, is the only non-US city in the top 15. Indeed, the 23
largest urban areas of the USA all rank in the top 27 most productive cities
in the world. The next 55 of the world's highest productivity cities are all
located in the high income OECD countries (OECD 2007), plus Taiwan,
Israel, Hong Kong and Singapore.
As we see in Table 7.3, the majority of the world's highest productivity
