In many countries, the capital city region is the beating heart of the entire economy. That’s probably hardly surprising, given that a capital is usually the most populous city in a country, as well as the centre of a nation’s political and economic ambitions. There are exceptions, however, and some cities rely on their capital’s economic clout far more than others. A OECD’s Cities at a Glance report revealed that capital cities account for around 26 percent of GDP on average in OECD member countries, while the organization’s database has more info on specific countries.
In the United States, Washington D.C. is the 20th largest city in terms of population. Given that rank, it only accounts for 0.7 percent of American GDP. Things are somewhat similar in Australia where the capital Canberra in the federal ACT district trails Sydney and Melbourne by a considerable distance in population. In 2018, Canberra’s contribution to GDP was just 2 percent.
In many of Asia’s economic powerhouses, the effect of the capital is felt more strongly. For example, Seoul accounts for more than half of South Korean GDP while Tokyo’s contribution in Japan is 33.3 percent. Because of their sheer size and high number of large cities, the capital effect was also felt less strongly in India and China where the capital regions stayed in the single digits as far as percent contributions to GDP go.
The capital is also crucial to many European economies with Athens a notable example. The Athens region accounted for 47.8 percent of Greek GDP in 2018. A notable exception on the continent is German capital Berlin with a 4.4 percent contribution, the reason for this being strong industrial regions in the country’s central and southern regions. In 2016, a German think tank even calculated that the German GDP would increase if Berlin was excluded from the calculation.
This chart shows the contribution of selected capital city regions to their countries’ GDP (2018).
Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.