TI 2013-104/VIII
Tinbergen Institute Discussion Paper
The Rat Race Between World Cities
Karima Kourtit
1
Peter Nijkamp
1,2
Soushi Suzuki
3
1
Faculty of Economics and Business Administration, VU University Amsterdam;
2
Tinbergen Institute;
3
Hokkai-Gakuen University, Sapporo, Japan.
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0
The Rat Race Between World Cities:
In Search of Exceptional Places by Means of Super-Efficient Data
Development Analysis
Karima Kourtit
Dept. of Spatial Economics
VU University
Amsterdam
The Netherlands
k.kourtit@vu.nl
Peter Nijkamp *
Dept. of Spatial Economics
VU University
Amsterdam
The Netherlands
p.nijkamp@vu.nl
Soushi Suzuki
Dept. of Life Science and Technology
Hokkai-Gakuen University
Sapporo
Japan
soushi-s@lst.hokkai-s-u.ac.jp
Abstract
This paper aims to provide a new methodological and empirical contribution to the rising
literature on the relative performance and benchmarking of large cities in a competitive world.
On the basis of a recent detailed database on many achievement criteria of 35 major cities in the
world, it seeks to arrive at a relative performance ranking of these cities by using Data
Envelopment Analysis (DEA). A novel element is the use of a new type of ‘Super-Efficiency
DEA’ to identify unambiguously the high performers (‘exceptional places’) in the group of
world cities investigated. This new productivity-based approach is complemented with two new
directions in DEA research, viz. a Distance Friction Method and a Context-Dependent method.
Keywords: world cities; city performance; Data Envelopment Analysis
JEL: C8, O1
* Tinbergen Institute, The Netherlands
1
Pn435kkss-29 JUNE FINAL
1. Exceptional Cities
The structural and worldwide urbanization trend has prompted the emergence of
metropolitan areas of an unprecedented scale. Especially in the current globalization age, such
areas act as international power stations, with a rich pluriformity of centripetal and centrifugal
economic, political and technological forces. Such world cities have a strong global control and
command impact, not only because of their sheer size, but more so because of their innovative
and creative potential (Glaeser and Kerr 2009, Sassen 1991, Shefer and Frenkel 1998). In this
context, the local R&D, knowledge and learning base also plays an important role (Acs et al.
2002, van Geenhuizen and Nijkamp 2011, Kourtit et al. 2011).
World cities are increasingly also involved in fierce competition on global product and
service markets, and consequently these metropolitan areas have to create favourable conditions
for economic agents, such as: a healthy entrepreneurial climate; a specialized basis of industrial
clusters; a diversified economic structure; an ecologically sustainable urban environment; a high-
quality research and educational infrastructure; a balanced population structure with sufficient
skills; international accessibility through majors hubs etc. (see also Cheshire and Magrini 2009).
World cities are essentially involved in a permanent global battle that is concerned with the
maximum development and exploitation of agglomeration externalities in international spatial
networks.
An interesting question is now how global players and local experts view the potential and
performance of these cities. In recent years, various attempts have been made to develop a
classification or ranking of world cities based on their actual performance or their perceived
success (see e.g. Taylor et al. 2009, Grosveld 2002, Arribas-Bel et al. 2011; Kourtit et al. 2012a,
Suzuki et al. 2011). Especially the seminal work of Taylor and associates has gained world-wide
recognition. A main challenge in empirical research is the development of a consistent,
quantitative data base that is appropriate for a comparative, strategic benchmark analysis.
One of the most detailed databases on world cities can be found in a recent study on the
‘Global Power City Index’ (GPCI) undertaken by the Institute for Urban Strategies (2010). A
thorough analysis of various world cities, 35 in total, was made in this study report, including not
only the megacities of New York, London, Paris, Tokyo or Beijing but also cities from emerging
economies such as Sao Paulo, Mumbai, Kuala Lumpur or Cairo. The GPCI database contains six
major clusters of relevant information on these cities. We employ this database for a benchmark
analysis of these cities and, therefore, it is discussed in slightly greater detail in the next section.
2
The basic proposition of the present paper is that a pure ranking of world cities on the basis
of their weighted achievement scores does not tell us very much about their economic efficiency,
which in the long run will be decisive for their prosperity and sustainability. Therefore, our study
aims to provide a more critical analysis of the performance data on these 35 metropolitan areas
by using Data Envelopment Analysis (DEA) to position these cities on the basis of their relative
performance, i.e. by relating their output to their input. This ratio is much more informative
about the actual economic profile of the city concerned. In this study, we also make a new
contribution to DEA analysis: namely, ‘Super-Efficiency DEA’, combined with a ‘Distance
Friction Minimization’ model by introducing a new method for calculating and identifying
super-efficient actors (in our case, cities). This methodology will be explained in Section 3.
Then, Sections 4 and 5, respectively, present and interpret the various empirical findings for the
database described above. Finally, the paper concludes with some suggestions for follow-up
research and policy action.
2. Description of the World Cities Database
For a systematic comparison of cities’ performance analysis and their urban
competitiveness, our empirical approach is based on a unique data set, the ‘Global Power City
Index’ (GPCI), produced by the Institute for Urban Strategies, under the aegis of the Mori
Memorial Foundation (2010) in Tokyo for the year 2010.
The GPCI index is used, as a strategic tool, to evaluate and rank the comprehensive power
determinants of 35 major cities worldwide, in terms of the strengths and weaknesses of their
performance in: creating wealth; enhancing social development; attracting investments;
providing an open and attractive urban ‘milieu’ or climate; offering access to social capital and
networks; encouraging integrated sustainability; and harnessing both human and technological
resources in productivity and competitiveness at local and global scales. In other words, the aim
of these world cities is to maximize urban XXQ (the highest possible urban quality) which may
strengthen their foundations for securing socio-economic development and competitive
advantage in a global playing field (Nijkamp 2010).
The comprehensive performance scores and rankings of these global cities in the GPCI-
data set are based on six main categories, namely: "Economy", "Research & Development",
"Cultural Interaction", "Liveability", "Ecology & Natural Environment", and "Accessibility".
Each of these main indicators was subdivided into relevant and measurable sub-indicators, so
that finally a consistent and tested database on 69 sub-indicators for 35 world cities was created.
Thus, we have a complete, extensive and quantitative database for a great variety of relevant
urban (sub-) indicators for all world cities under consideration.
Next, a set of five worldwide types of actors was identified: managers, researchers, artists,
visitors, and residents. These people were asked to score the importance of each of these
