Origin of productivity remains in the city

Cities are the economically most successful areas in modern economies. More people are migrating from the countryside into the city than vice versa, with productivity and salaries higher in urbanized areas. Edwin Deutsch, Professor of Mathematical Economics at the Vienna University of Technology, has taken a closer look at this phenomenon: The more diverse and manifold the population, the higher local economic growth -- that is the conclusion of his econometric calculations.

The Heart of the Economy Beats in the Cities

"The utopian idea of a nation developing in a romantic ideal of rural areas has faded over the last few decades," Professor Deutsch believes. He developed mathematical models correlating vast amounts of economic data from a variety of regions, and he found clearly visible trends (in accordance with international studies): companies are most productive where they encounter a wide variety of economic activities. Also, the economic stability in times of crisis increases with the manifold of business and occupational groups.

This variety is considerably larger in cities than in smaller towns or rural regions. In the countryside, there often develop regional centers for specific needs -- such as centers based on agricultural resources or traditional culture. But these "polycentric structures," as Professor Deutsch calls them, differ substantially from urban centers, where all these different branches are geographically intermingled. Higher productivity is discernable in regions where the labour location density (defined as the number of work places per household) is high -- here, too, cities surpass rural areas. Professor Edwin Deutsch believes that progressive urbanization is a good thing; to create a successful and creative environment, a variety of people from a variety of different fields have to come together and communicate -- and this works best in urban regions.

Housing Development Leads to Social Diversification

One of the results of the research project especially attracts the awareness of the scientific community: in addition to diversified economic structures, a diverse range of living conditions proves to have positive effects. In Austria, social housing is widespread. "A good mix of rent, home ownership and social housing leads to a mix of social classes and groups, it boosts social cohesion -- and this is good for the economy," professor Deutsch explains. Regions with a higher ratio of social housing are the economically more productive ones.

While rural areas are dominated by the middle class, both poorly skilled people as well as the educational elites are well represented in cities. Professor Deutsch found that education has a strong impact on migration and living conditions; while poorly educated people move to areas where they can find jobs, it is the other way around with the highly educated workforce. Companies in the knowledge-based economy are more mobile and tend to move to places where they can find a large supply of highly-trained employees.

Productivity is Urban

It is not yet clear which final conclusions will be drawn from these mathematical models for politics and regional planning. After all, the research project at TU Vienna aims at contributing to a deepened understanding of land use regulation and regional planning. "In the future, some people will still want to live in rural regions," professor Deutsch says. "But high productivity and economic momentum are generated in urban areas -- and this is not going to change."