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The capital city effect

Research

Mike Keogh (Associate Director of Research & Strategy) discusses how it is interesting to note a country's capital city effect, by looking at a nation’s prosperity without its capital.

 

In the UK, where debate centres on a north-south divide, it is telling to highlight that by factoring out London and its residents, GDP per capita would shrink by 11%. A France without Paris would decrease economic output per capita by 15%. The situation is the same in many European countries, albeit far less pronounced in Spain and Italy, with a reduction of 6% and 2% per capita respectively. There is, however, one exception: Germany, whereby output per capita nationally would actual rise marginally without Berlin, reflecting Germany’s Federal state and the strength of its regional cities. 

 

How does Europe compare globally? Well in the US, Australia* and China, the capital’s influence on output per capita is far less dominant than that witnessed across broad Europe. Even Japan, factoring out Tokyo and its residents, would only see output per capita decline 5.5%. This seems light given the dominance of Tokyo, but it is a factor of its demographic importance. Whilst Tokyo accounts for 33% of output and 30% of Japan’s population, in France, Paris delivers 30% towards output, but accounts for only 18% of the population. Similarly, in the UK, London is responsible for 23% of output, but just 13% of the population. 

 
Without a notable change in government policy to re-distribute wealth, the growing dominance of particular global cities is only going to grow. 

 

 

 Fig.1 Capital city effect

 

*still only 1.4% factoring out Sydney, and not Canberra

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Michael Keogh

Mike Keogh

Director of Research

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