Does decentralization of governance promote urban diversity? This is the question that Jorge Díaz-Lanchas, professor at ICADE and former researcher from the EU Commission – Joint Research Centre, and Peter Mulder, from TNO Energy Transition Studies of Amsterdam, pose at this paper published at Regional Studies.
Authors analyze the particular case of the Spanish decentralization process and of its urban dynamics. In order to do so, they use firm-level data from Bureau Van Dijk based on information of the Spanish Registry of Commerce, time-varying transportation-cost data and fiscal and political data on decentralization. Their main conclusion is that in an era of falling transport costs, fiscal and political decentralization helps smaller cities in an urban system to expand and diversify their economic structure, offsetting potential negative effects of the economic integration on size and growth of small and medium cities. This conclusion lends support to the idea that decentralization may help explain why second-tier cities often outperform first-tier cities when it comes to economic growth.
These authors´ research has been published in a context at which institutional deconcentration of governmental headquarters as a positive phenomenon for achieving more diverse urban economic structure and a more even city-size distribution is emerging, which makes this paper particularly relevant.
Abstract:
«The worldwide trend to decentralize the responsibilities and budgets of governments impacts regional economies in various ways. We use the example of Spain to test empirically whether the decentralization of governance is an important determinant of the sectoral composition of cities in an urban system. Our regression results, exploiting unique firm-level and time-varying transport-cost data, support the hypothesis that governance decentralization and the establishment of regional government headquarters in specific cities have been conducive to a more diverse urban economic structure and a more even city-size distribution in the Spanish urban system during a period of continuous reductions in transport costs.»