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Romes without empires: urban concentration, political competition, and economic growth

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posted on 2009-01-01, 00:00 authored by C Karayalcin, Mehmet UlubasogluMehmet Ulubasoglu
Many developing economies are characterized by the dominance of a super metropolis. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate different mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by different interest groups (localized in different specialized cities/regions) will lead to low investment and growth when the number of such groups is small. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized in relatively few urban nodes, tax rates would be higher and growth rates lower. Our empirical work exploits the connection between urban wealth (with the political power it affords) and national soccer championships. By using a cross-country data set for 103 countries for the period 1960-99, we find strong and robust evidence that countries with higher concentrations in urban wealth-as proxied by the number of different cities with championships in national soccer leagues-tend to have lower long-run growth rates.

History

Series

School Working Paper - Economics Series ; SWP 2009/18

Pagination

1 - 61

Publisher

Deakin University, School of Accounting, Economics and Finance

Place of publication

Geelong, Vic.

Language

eng

Notes

School working paper (Deakin University. School of Accounting, Economics and Finance) ; 2009/18 Many developing economies are characterized by the dominance of a super metropolis. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate different mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by different interest groups (localized in different specialized cities/regions) will lead to low investment and growth when the number of such groups is small. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized in relatively few urban nodes, tax rates would be higher and growth rates lower. Our empirical work exploits the connection between urban wealth (with the political power it affords) and national soccer championships. By using a cross-country data set for 103 countries for the period 1960-99, we find strong and robust evidence that countries with higher concentrations in urban wealth-as proxied by the number of different cities with championships in national soccer leagues-tend to have lower long-run growth rates.

Publication classification

CN.1 Other journal article

Copyright notice

2009, The Authors

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