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The inherent tension between regional equality and economic growth (efficiency) is recently much debated in the context of place based development policy and agglomeration in the European Union. A general conclusion reached in the literature is that a policy targeted at regional equality may be harmful for economic growth. Such policy therefore should be transformed in such a way that it also promotes the mobility of both people and firms and hence facilitates the possibilities of increased agglomeration. Recent insights from economic theories suggest that agglomeration externalities are not taken into account in the migration decision of firms and people, causing the dynamic urbanisation processes to not necessarily result in a (social) welfare optimum. This is even more so if other welfare effects than GDP and product variety are taken into account. Regional economic development is not sustainable if the dynamic urbanisation processes stemming from agglomeration economies do not lead to a welfare optimum. In this paper we assess the possibility of a non-sustainable regional development path. We conclude that strong additional negative externalities of growing large agglomerations are harder to prove than negative externalities of small agglomerations becoming smaller. Moreover, the size of short run negative effects that will stimulate the migration of people has not been adequately assessed. The European Union should therefore be careful in interpreting place-based costs and benefits of growing, large agglomerations at the detriment of small regions. [ABSTRACT FROM AUTHOR]

European governments are tending to perceive cities as sites of renewed economic dynamism and physical renaissance, and as places that can help to resolve social and environmental challenges. The paper presents three propositions for why the fortunes of cities in advanced economies may have improved. It then offers evidence from across Western Europe to assess whether they have done so, both in comparison with their past trajectories and in relation to smaller urban and rural areas. One finding is that cities in aggregate have experienced continued prosperity rather than decline and revival or accelerated growth. Another is that their overall position relative to smaller settlements does not seem to have changed greatly. Looking in more detail, however, there is more evidence of resurgence, as well as the opposite. National variations seem important and cities in Finland, Sweden, Ireland, Britain and Spain show signs of substantial economic improvement over the last decade. In contrast, cities in Germany have experienced a marked slowdown, albeit from a position of comparative prosperity at the outset. [ABSTRACT FROM AUTHOR]