Political centralization, federalism, and Urban development: Evidence from US and Canadian capital cities

A growing empirical literature links political centralization with urban development. In this paper we present evidence showing how different patterns of political centralization in the United States and Canada affected urban agglomeration during the twentieth century, with a specific focus on the impact on the population of capital cities. Using data on Canadian and US cities and metropolitan areas, we find that the national capital effect on population grew over time in both countries but more so in the United States whereas the subnational (i.e., provincial or state) capital effect rose much more significantly in Canada than in the United States, controlling for other factors like geography and climate. We argue that these patterns in the national and subnational capital city effects reflect different trends in federalism in the two countries. In the United States, the Jeffersonian-Jacksonian tradition of states’ rights and localism was transformed into a more nationally centralized form of federalism during the Progressive Era, but states and localities continued to retain significant autonomy. In Canada, federalism came to favor provincial rights but not localism. We believe that that these diverging trends were driven by institutional differences that gave the various levels of governments in Canada and the United States different access to revenue sources.