(Yusuf and Nabeshima 2007).<sup>17</sup> World class universities are most often located in the major European and North American cities and in East and South Asia, they are overwhelmingly to be found in the capital cities or the very largest urban centers. The ability of these regions to retain talent by providing attractive jobs, amenities, social services and housing is, as Richard Florida has noted, a necessary condition for their economic success (Florida 2005a; Florida 2005b; Florida 2002;).<sup>18</sup> The bane of the mega city is congestion and the associated transport costs, environmental pollution, and higher living expenses. Other problems can arise from the lack of inter-jurisdictional coordination, from weaknesses of governance, from the difficulties in attaining the desired level of fiscal effort, and raising funds from capital markets and the often daunting challenges of managing the finances of a metropolis.<sup>19</sup> These last three are not only related to the size of cities. Furthermore, research has uncovered no clear relationships between size and environmental pollution.<sup>20</sup> However, rental costs do tend to be higher in the mega city, which affects wages and hence, induces some low value adding and land intensive activities to migrate to the suburbs or smaller cities.<sup>21</sup> Transport and commuting costs are a separate matter and for these there are solutions. First urban intensity can be a plus in that it increases the cost effectiveness of 17 There is a rich literature accumulating on this topic. Bettencourt, Lobo, and Strumsky (2007) find evidence of super linearity in patenting among metro regions in the U.S., that is larger regions generate more patents.

18 Our own recent research and that of Florida (Yusuf and Nabeshima 2007; Florida and others 2006) and his co-workers has made clearer the seminal role that universities are likely to play in the knowledge economy of the future (O'Mara 2005; Etzkowitz 2002). The university is becoming the axis of a creative hub not only generating the knowledge which underpins innovation but also in mobilizing talent, testing ideas and creating a “tolerant social climate”. Florida’s study of Sweden’s regions shows that regional development was keyed to the contribution of universities, first but also the provision of amenities and services (Mellander and Florida 2006). Ireland’s economic success which is closely related to the flow of FDI was primarily the consequence of a ratcheting upward of the supply of technical graduates. It spent little on research and innovation but Ireland has the highest number of students in the EU enrolled in scientific subjects (Crafts 2005).

> 19 It is important not to forget the qualifications. Large cities need not be more productive or competitive unless they can muster the industrial, innovative, management and other capabilities and create the environment conducive to growth. As a recent OECD (2006) study indicates, of 44 metro regions less than half exceeded the national average growth rates.

> 20 There is relatively little evidence on city size and air pollution. Overman and Venables (2005) report that in developing countries both sulphur dioxide and particulates trace an inverted U shape first rising with size and then falling.

> 21 See Overman and Venables (2005).

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