The Impact of Urban Primacy on Economic Growth in Iran

The shape of urban development and its impact on economic growth is one of the most important issues in urban economic literature. In accordance to the corresponding theory, economic growth and urban concentration have an inverse-U shape relation. The shape of urban development is related to how resources are spread out in existing cities of an urban system and investigated under the term of urban concentration. Indeed, urban concentration shows that at any point in time resources may be concentrated (accumulated) only in one or a few large cities or spread too thinly across more cities. Three indicators are used for measuring urban concentration: Hirschman-Herfindahl Concentration Index, Pareto Distribution Coefficient and Urban Primacy. In this study we focus on Urban Primacy indicator and examine its effect on economic growth in Iran based on a Solow-Swan growth specification during 1960-2006. Also the optimal level of urban primacy is computed and the effects of its main determinants are examined. The empirical results show that urban primacy influences significantly and dynamically Iran’s economic growth.