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Should policymakers create towns artificially?

Summary:
Alexandra L. Cermeño and Kerstin Enflo in this piece look at evidence from Swedish towns: Urban growth is crucial for modernisation, and the wave of new towns in China since the 1980s is one example of a strategy employed by policymakers to encourage the process. This column analyses the long-run success of a town foundation policy in Sweden between 1570 and 1810. While the ‘artificially’ created towns failed to grow in the short term, they eventually began to grow and thrive, and today are as resilient as their medieval counterparts.  … We stress that credible coordination efforts based on investments may substitute for agglomeration economies and natural advantages when creating a new town, as long as any natural constraints to population growth have been removed. However, by

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Alexandra L. Cermeño and Kerstin Enflo in this piece look at evidence from Swedish towns:

Urban growth is crucial for modernisation, and the wave of new towns in China since the 1980s is one example of a strategy employed by policymakers to encourage the process. This column analyses the long-run success of a town foundation policy in Sweden between 1570 and 1810. While the ‘artificially’ created towns failed to grow in the short term, they eventually began to grow and thrive, and today are as resilient as their medieval counterparts. 

We stress that credible coordination efforts based on investments may substitute for agglomeration economies and natural advantages when creating a new town, as long as any natural constraints to population growth have been removed. However, by demonstrating the initial failure of the town foundation policy, we underline the importance of overcoming any natural constraints to urban growth. Finally, and in relation to the debate about the Chinese ‘ghost towns’, our paper shows that ‘artificially’ founded towns may take time to thrive.

In light of our findings, and the examples of the Swedish kings, policymakers should consider how to signal to potential migrants and investors that they’ve committed to improving an area. Simultaneously, they must identify the potential constraints for growth in a post-industrial world. Finally, policymakers should be aware that their choices may trap populations in ‘sub-optimal’ locations for centuries.

Nevertheless, we note that the founded towns have persisted until today and appear neither better nor worse than their medieval counterparts in terms of long-run resilience. Thus, while kings may not be able to create towns that thrive, path-dependency forces certainly can. 

Hmm..

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Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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