Description

This paper studies the impact and determinants of the concentration of population in capital cities across countries. Fast population growth in capital cities is a widespread phenomenon that does not seems to be explained by economic factors. In addition, this fact violates Zipf’s law, a strong empirical regularity in the distribution of city sizes. The paper addresses first the impact of this fact on economic growth. A model is built to study the consequences of distortions in the spatial allocation of resources in production. The empirical results show a negative correlation between this distortion and economic growth. The second part of the paper studies the determinants of this phenomenon. Three hypotheses advanced in the literature are tested. The results show that trade barriers do not explain concentration in capitals, nor does political instability. Both results are robust and oppose previous findings in the literature. This paper finds support to the hypothesis that concentration in capitals can be explained by weak political rights in the population.