The Political Geography of Cities

• In Event: Remote Sensing—Methods and Applications

Abstract

This paper studies the causal effect of gaining and losing the status as a subnational political capital on urban development. We make three contributions. First, we provide a global data set of first order administrative and capital city reforms over the period from 1990 until 2014. Second, we combine these reforms with remotely-sensed daytime images to detect urban boundaries and with nighttime lights to measure economic activity at the city level. Third, using an event study design, we show that gaining subnational capital status has a sizable effects on city growth at the intensive and extensive margin. Losing the status does not lead to a symmetric decrease in activity. The economic advantages to having the political status of a subnational capital are also not uniform across the level of development, but are greater in regions where urbanization and industrialization occurred later. We provide first evidence that locating subnational capitals in areas with better locational fundamentals, e.g. better internal and external market access, has a substantially larger effect on economic activity than in cities where fundamentals are lacking. We also document diminishing returns to becoming a subnational capital if the territorial structure is already strongly decentralized. These findings illustrate that there are limits to how much politics can shift economic activity into the hinterland in the medium run.

Author

• Richard Bluhm, Leibniz University Hannover