The Economic Performance of European Cities and City Regions: Myths and Realities

The ever-increasing concentration of people and economic growth in the largest cities relative to the rest of the country has slowed down or even reversed in many of the developed European countries over the last decade. This trend contradicts what the global cities, urban economics and new economic geography literature would predict. This trend can be interpreted from two points of view: (1) the trend is due to large obstacles to further large city urbanization and thus is inefficient or (2) this trend highlights alternative pathways to growth than the mega-city approach and may be as, if not more, efficient. This trend may be linked to Europe's uniquely polycentric urban structure with high number of small- and medium-sized cities. In addition, improvements in the access to services, including broadband, outside large cities may have facilitated the higher growth rates of smaller centres and rural regions and increased their appeal for residents and firms. Last but not least, negative externalities in the large cities, such as congestion costs, pollution, labour crowding and high cost of living, may increase the appeal of smaller centres and rural regions.