Does Urbanization Mean Bigger Governments?

Abstract

In this paper, we introduce urbanization as an important driver of government size. Using panel data for 175 countries from 1960 to 2010, we find that there is a close link between urbanization and the size of the public sector, especially when looking at education, health care, and social issues. Various robustness checks confirm this finding. An analysis of state-level public spending in Colombia and Germany confirms our hypothesis on the subnational level. On the microeconomic level, people in urban areas acknowledge that governments should take more responsibility, and they are more in favor of redistribution. This finding can help to explain the evolution of government size, and it can also predict the present and future needs of urbanizing areas.