The Organization for Economic Cooperation and Development (OECD), an organization of developed world countries, recently released a report called “The Metropolitan Century.” I read it while researching an article, but it’s full of interesting information. In fact, I think it even makes a good introductory primer to trends in urbanism.
First, they noted that productivity increases 2-5% when you double the size of a city. This is basically Geoffrey West’s finding, or something close to it. But what they also say is that if the population (weighted by distance) within 300km of a city (~185mi) doubles, productivity grows by 1-2%. So the population of the extended hinterland also plays a role in urban productivity. A city surrounded by a hinterland that is shriveling up might thus have some modest drag on its economy.
In the US, the OECD says that San Francisco and Washington, DC outperform economically relative to their size. Los Angeles and Chicago underperform. Among the top global cities, London outperformed relative to its size whereas New York was right at its expected value.
They also put some meat on the bones of real estate prices. They estimate that building regulations increase prices by two to eight times in central London and New York. Even in smaller city centers they estimate a 50% increase in prices. (This wasn’t specifically housing cost related, but overall real estate prices it would appear). They say:
Land-use regulation that limits new construction benefits home owners at the expense of renters and prospective residents. Home owners tend to benefit in several ways. First, they can enjoy the amenity value of attractive protected neighbourhoods. Second, they benefit from the house price increases that regulation causes. Land-use regulation can also be used to prevent people with lower social status from moving into a neighbourhood (for example by prohibiting multiple dwelling units). In contrast, renters will suffer because they have to pay higher prices. Similarly, prospective residents lose out because they have to pay more to move to the city. It also limits labour force mobility and can have detrimental effects on the entire economy of a country.
As home owners are often the most vocal group of the three, local governments might be tempted to pay particular attention to their wishes and restrict construction strongly. This might have positive effects on the current residents of a city, but will have negative effects on the rest of the country. If every local government pursues such a policy, it leads to a situation in which the negative effects outweigh the positive effects and most residents will be worse off.
There’s also some interesting info on whether it’s better to have one big city that dominates, or a collection of smaller cities. Here’s what they say on that:
It is not only the size of cities, but their spatial distribution as well that matters. Countries with more polycentric systems, i.e. systems of large cities instead of a small number of megacities, are found to have higher per capita GDP. The reason for this could be that, with a larger number of metropolitan areas, a bigger part of the territory benefits from being close to at least one of these metropolitan areas compared to, for example, a situation where one megacity combines the population of all those metropolitan areas.
In contrast, within a region of a given country, a more dispersed structure of cities appears to be associated with lower per capita GDP than if one larger city were to combine the population of those cities. In this case, with spillovers from small cities being fairly minor – both geographically and in size – having one large city in a region rather than a network of small cities may be economically more beneficial. This may also apply to small countries.
These are just a couple small samples. The full report is very readable, full of interesting insights. I believe it would even make a good introductory textbook on urbanism. Grab a copy if you can.