# **7.2 Issues for Future Research**

There are a number of issues to consider for future research. First, with our dataset and empirical approach we need to keep in mind both a purely statistical point, as well as one of a more methodological/conceptual nature. The first refers to the limits we have after crossing variables from different datasets (Taylor/UN/EOS) in terms of the overlapping number of observations/cities (N), which for some indicators in Table 1 is very small. Thus, a major challenge in the next stage is to expand this database, and fill in the significant gaps within the existing set of over 400 cities. We expect to be able to collaborate with partners in this initiative. This expanded database would be made available on the web to all researchers and policy-makers (see Annex C for the current list of cities for which this dataset has information on at least some of the variables of interest in this research project).

Second, we need to probe much deeper than was possible in this preliminary exploration on the issue of the dynamics between globalization and governance, and their interface with city performance. For instance, we found that globalization and governance are positively correlated with each other at the city level. Our simple conceptual and econometric model pointed to possible causality from globalization to good governance. Yet it cannot be ruled out obviously that in reality there is bi-directional causality, within an endogenous model where there is a possible virtuous circle between both variables. Within such a framework, an extension of the simple model presented in this paper would be warranted.<sup>19</sup> This requires further research with additional data and a more complex econometric model with instruments, _inter alia_ accounting for endogeneity issues. Furthermore, in this context the brief references to ancient times made earlier are suggestive of the need to probe further with an historical perspective.

Given the constraints in data availability at the city and country level, in this initial research inquiry we did not include some other important institutional dimensions, such as decentralization and local finance. Obviously it cannot be ruled out that some of the significance of the governance variables for which we did have measures at the city and country level, such as the corruption-related ones, may be picking up in part some of the importance of other governance and institutional variables. Future research would need to 19 In essence we could conceptualize of another hypothesis, where the ability of cities to translate global opportunity into local value depends on governance, and that cities compete with each other on the basis of governance and not on the basis of initial endowments (infrastructure, culture etc). Cities with better governance remain globalized for longer periods of time (attract higher flows of capital, people, firms, finance, products) or attract such flows systemically over time (growth or change in volumes of these flows over time). This test would allow us to distinguish between those cities that are highly global and then drop in their rankings over time. For such a test, we would need at least two time periods. A possible model specification could include: Δ Y = f (X1, X2, X3)+ ε where Δ Y = change in the vector of governance indicators, to capture improvements or deterioration in governance over time which is a proxy for staying power in translating global opportunity to local value; X1 = a dummy for an alpha city from the Taylor database; X2 = dummy for a beta city, and X3 = dummy for a gamma city. With such a specification one could investigate whether alpha and beta type cities have better governance compared to the gamma type cities.

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