NCPA - National Center for Policy Analysis

Small Cities Are Becoming New Engine of Economic Growth

May 16, 2012

The conventional wisdom is that the world's largest cities are going to be the primary drivers of economic growth and innovation.  For example, in America, it is commonly maintained by pundits that "megaregions" anchored by dense urban cores (think New York City, Chicago, etc.) will dominate the future, says Joel Kotkin, distinguished Presidential Fellow in Urban Futures at Chapman University.

However, a less fevered analysis of recent trends suggests a very different reality: when it comes to growth, economic and demographic, opportunity increasingly is to be found in smaller, and often remote, places.  This can be seen in Forbes' analysis of the fundamentals of small and midsized metropolitan areas with populations of 1 million or less.

  • Forbes' Best Cities For Jobs survey found that small and midsized metropolitan areas accounted for 27 of the 30 urban regions in the country that are adding jobs at the fastest rate.
  • The three largest metropolitan statistical areas that made the top 30 -- Austin, Houston and Salt Lake City -- are themselves highly dispersed with large suburban populations.
  • During the previous decade, urban areas with fewer than a million people expanded by 15 percent, compared to barely 9 percent for larger urban areas, notes demographer Wendell Cox.
  • In those 10 years, areas with fewer than a million people accounted for more than 60 percent of urban growth.

These trends come despite the many inherent advantages that dense urban areas possess: hub airports, big labor markets, concentrations of schools, cultural amenities and specific industrial expertise.  Polls demonstrate that Americans are willing to forgo such amenities, in favor of the lifestyle that only smaller cities can provide.

  • A recent survey from the National Association of Realtors found that 80 percent of those surveyed preferred a detached, single-family home.
  • Only 7 percent, on the other hand, wanted to live in a dense urban area "close to it all."
  • Some 87 percent expressed a strong desire for greater privacy, something that generally comes with lower-density housing.

Interestingly, such deurbanizing trends are not unique to the United States, but can actually be witnesses around the world.  A recent McKinsey study found, for example, that "middle-weight" cities in India have already started taking a larger percentage of the world's urban growth.

Source: Joel Kotkin, "Small Cities Are Becoming New Engine of Economic Growth," Forbes, May 8, 2012.

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