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Reversal of economic fortunes: institutions and the changing ascendancy of Barcelona and Madrid as economic hubs

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  • Rodríguez-Pose, Andrés
  • Hardy, Daniel

Abstract

This paper looks at the divergent economic trajectories of Barcelona and Madrid since Spain's transition to democracy. It highlights how Barcelona, the city that was better positioned four decades ago to emerge as the main Spanish economic hub, has lost out to Madrid. We argue that the contrasting trajectories of the two cities have less to do with the pull of Madrid as the capital of Spain, with the development of new infrastructure in the country, or with agglomeration economies, and more with institutional factors. A growing societal divide in Barcelona along economic, social, and identity lines has led to a greater breakdown of trust and to the development of strong groups with limited capacity to bridge with one another than in Madrid. This has entailed the emergence of negative externalities that have limited the economic potential for growth in Barcelona and facilitated the rise of Madrid as the main economic hub within Spain.

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  • Rodríguez-Pose, Andrés & Hardy, Daniel, 2020. "Reversal of economic fortunes: institutions and the changing ascendancy of Barcelona and Madrid as economic hubs," LSE Research Online Documents on Economics 105772, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:105772
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    Cited by:

    1. Alessandro Melcarne & Juan S. Mora-Sanguinetti & Rok Spruk, 2021. "Democracy, technocracy and economic growth: evidence from 20 century Spain," Working Papers 2118, Banco de España.
    2. Sören Scholvin & Moritz Breul & Javier Revilla Diez & Andrés Rodríguez Pose, 2021. "Introduction: Nodes in global networks," Growth and Change, Wiley Blackwell, vol. 52(1), pages 4-11, March.

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    JEL classification:

    • N0 - Economic History - - General

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