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posted on 18 August 2016

The Capital Effect

by Felix Richter,

-- this post authored by Martin Armstrong

According to the well-worn phrase, all roads lead to Rome.

A capital city being the heart of a nation, or an empire, is certainly nothing new - but as economies and societies evolve to meet modern demands and challenges, to what degree are these traditional centres of economic power crucial to the prosperity of a country?

Recent analysis of European countries by the German think tank Institut der deutschen Wirtschaft shows the percentage change to GDP per capita that would occur if the capital city was removed from the calculation. The results vary greatly by country with the largest impact being seen in Greece. If Athens were to be taken out of the Greek economy, GDP per capita would suffer to the tune of 19.9 percent.

Not too far behind would be France and Paris - there a 15 percent fall. In the UK, an independent London would shrink GDP by 11.2 percent. Uniquely, Berlin being removed from the German economy would lead to a 0.2 percent rise.

This chart shows the resulting change in a country's GDP when the capital city is taken out of the calculation.

Infographic: The Capital Effect | Statista

You will find more statistics at Statista.

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