Can kings create towns that thrive? The long-term implications of new town foundations

Abstract

Town foundations have been at the core of urban planning since the onset of civilization. This paper describes the long-run impact of an urbanization place-based policy that was considered a failure by contemporary policymakers. We test the impact of founded towns using a series of town foundations that took place between 1570 and 1810, when the Swedish Crown conferred monopoly market rights to trade upon 31 previously rural ordinary parishes. We show that towns were founded in locations with little natural potential, evident in their limited impact on agricultural surplus in the surrounding hinterlands. However, the new foundations drove extensive growth in terms of population and created positive spillover effects up to 40-50 km around the settlements. Still, the founded towns remained extraordinarily small by the end of the policy period. It was not until the Industrial Revolution that these towns began to thrive. We suggest that trading rights and sunk investments initially served to coordinate expectations about future growth. Once the towns started to grow, agglomeration effects generated persistence in the long term.

Fascistville: Mussolini’s new towns and the persistence of neo-fascism

“…Pharaoh Menes of Egypt (3100 BCE), Alexander the Great (356-323 BCE), and the kings of the Swedish Crown (1570-1810 CE) all "aimed for immortality" by founding New Towns (Cermeño & Enflo, 2019). Recently, China has founded new cities such as Hallstatt and Ordos Kangbashi.…”

“…p.133. Examples include the Autobahn in Nazi Germany(Voigtlaender & Voth, 2014), roads in Kenya(Burgess et al, 2015), the infrastructures for the 1980 Olympic games in the USSR(García & Magnúsdóttir, 2019), as well as the New Towns founded by the Swedish Crown(Cermeño & Enflo, 2019) and more recently in China.…”

History and urban economics

“…On the empirical side, it means that we have to worry about the direction of causality when relating urbanization and productivity growth. One empirical paper that makes progress in disentangling this causality problem is Cermeño & Enflo (2019), which studies the impact of towns founded by Swedish rulers on local productivity, both before and after the onset of industrialization. On the theoretical side, it calls for the integration of the causal effect of cities on technological progress into models of urban growth.…”