Measuring growth and convergence at the mesoscale

TL;DR

This paper reframes growth and convergence by analyzing at the mesoscale of Functional Urban Areas (FUAs) rather than national or administrative units. Using 8,790 FUAs that encompass around 3.9 billion people and roughly 80% of global GDP, it shows that convergence is stronger within capability strata and divergent across them, driven by productive capabilities captured by the Economic Complexity Index (ECI). The authors document a nonlinear, regime-dependent growth process, where capability upgrades induce a J-curve: a short-run disruption followed by medium-run acceleration, with no stable low-income metropolitan traps. These findings imply that national convergence policies may misalign with the geographic scale where capability accumulation actually operates, and they highlight the importance of subnational, capability-aware policy design to address urban growth and rising within-country inequality. The mesoscale analysis thus provides a more nuanced, space-sensitive understanding of global development dynamics and the role of urban capabilities in shaping growth trajectories.

Abstract

Global inequality has shifted inward, with rising dispersion increasingly occurring within countries rather than between them. Using 8,790 newly harmonised Functional Urban Areas (FUAs), micro-founded labour-market regions encompassing 3.9 billion people and representing approximately 80% of global GDP, we show that national aggregates systematically, and increasingly, misrepresent the dynamics of growth, convergence, and structural change. Drawing on high-resolution global GDP data and country-level capability measures, we find that the middle-income trampoline that previously drove global convergence is flattening. This divergence in the lower-income regime does not reflect poverty traps: low-income FUAs exhibit positive expected growth, and the transition curve displays no stable low-income equilibrium. Instead, productive capabilities, proxied by the Economic Complexity Index, define distinct growth regimes. FUAs converge within capability strata but diverge across them, and capability upgrading follows a predictable J-curve marked by short-run disruption and medium-run acceleration. These findings suggest that national convergence policies may be systematically misaligned with the geographic scale at which capability accumulation operates.

Figures (11)

• Figure 1: We utilize FUAs as aggregating unit over various spatial fields. Those include, GDP, Population, HDI, RWI and several national level statistics such as TFP or ECI if no higher resolution was available. With this we construct the timeseries of observation for each FUA.
• Figure 2: Spatial inequality structure: functional vs. administrative geography. Left column decomposes GDP per capita variance into between-country (purple) and within-country (red) components (1992--2019). Right column plots within-unit RWI variance share against GDP per capita for 20 countries with $\geq$12 units. Across all scales, between-country inequality declines while within-country inequality rises. However, only FUAs reveal a significant GDP--inequality relationship ($r^2=0.146$, $p=0.097$); administrative units (ADM1--3) show no such pattern ($p>0.33$). Functional economic geography recovers structure that arbitrary boundaries obscure.
• Figure 3: Convergence is affected by MAUP. Increasing urbanisation beggs the question of what spatial disagregation is appropriate. Whatever the biases introduced by NTL based GDP estimates, they do not account for the jarring differences in convergence rates as they apply consistently.
• Figure 4: Flattening of the middle income trampoline in recent years. Here we construct the solow phase diagram, with a notable distinction. The diagonal represents the average growth trend, indicating that no FUA is in a development trap. Therefore, fixed points represent relative movement towards or away from each other. This pattern over different GDP levels indicates structural differences in growth regimes. (Motion curve amplified)
• Figure 5: We disagregate growth rates of Fuas by the country level ECI to answer whether conditional convergence differs. We find strong differences in convergence regimes.