I. Spatial logic: why the center takes everything
If you ask the one question that explains much of Moldova’s economic problems, it is this: why is economic activity so unstoppably concentrated in Chisinau – and why is this so difficult to change? The answer lies in the book by eminent economists Masahisa Fujita, Paul Krugman, and Anthony Venables, Spatial Economics: Cities, Regions, and International Trade (1999), as well as in the World Bank report Rethinking Economic Geography 2009.
The world in these models is not homogeneous – it self-organizes into a hierarchy. The mechanism is simple and brutal at the same time: once concentration exceeds a critical threshold, it becomes self-replicating. Firms go where the workers are. Workers go where there are firms. The gap between center and periphery does not narrow by itself; it deepens.
Three properties of this model are critical to understanding the Moldovan case.
Nonlinearity: the system looks stable for a long time, then abruptly topples over. The Moldovan province looked tolerable in the 1990s and became depressed by 2010 – this is not a gradual deterioration, but a structural break.
Irreversibility: once the center is established, it is extremely expensive and inefficient to bring production back to the periphery with subsidies. Chisinau’s agglomeration advantages will not disappear if the state builds a factory in Soroca district.
Scale invariance: the same dynamics is reproduced at every level – global, national, regional. Chisinau is simultaneously a periphery in relation to Western Europe and a center in relation to its own districts.
The World Bank accepts this logic, but rejects its pessimism. Concentration is effective – so we should not fight it. It is necessary to manage its consequences through three dimensions: density – to maintain agglomeration where it has already emerged; distance – to reduce communication costs between the center and the periphery; separation – to remove administrative, tariff, and institutional barriers. The political conclusion of the report is radical: invest in people, not places.
In the case of Moldova, this logic works at two levels. About 35-40% of the country’s GDP is produced in Chisinau, with a population of about 20% of the total. This is the classic monocentric structure. All other areas are periphery of the first order. Transnistria, Gagauzia, northern districts are the second-order periphery with additional barriers of separation.
The agglomeration effect of the capital is real and measurable: labor productivity in Chisinau is 2-3 times higher than the national average. This is not injustice – it is the arithmetic of scale. The problem is not that Chisinau is rich, but that the gains from agglomeration are not capitalized for the benefit of the country as a whole – a significant part goes with emigrants or remains in non-transparent structures.
The division in the Moldovan case exists in several forms simultaneously. The Transnistrian conflict divides the country geographically and economically – these are classic barriers of division that double the costs for Moldovan business. Institutional separation – the gap between formal rules and actual practice – is the most expensive barrier to investment. Finally, partial integration with the EU through DCFTA creates an asymmetric separation: Moldovan goods have access to the European market but cannot win competition. This creates an incentive to export people rather than products.
The main conclusion of the first chapter is formulated simply: it is pointless and counterproductive to fight concentration in Chisinau. The correct policy is to capitalize the agglomeration effect for the benefit of the whole country. And the key barrier is not geographical remoteness, but institutional separation – unreliable property rights, unpredictable justice, corruption in enforcement proceedings.
II. The post-socialist trap: Moldova as an extreme case
Grzegorz Gorzelak’s work on regional development in Central and Eastern Europe, the OECD analyst on Romania and Bulgaria, and the World Bank’s Golden Growth report describe three phases of the same process – and Moldova is going through all three simultaneously and at an accelerated pace.
Gorzeliak captures a moment of divergence: why transformation immediately created polarization. Socialism artificially supported deconcentration of production – factories were built in small towns for political rather than economic reasons. When the market freed up, agglomeration forces kicked in at double speed, compensating for decades of artificial restraint. The capitals and a few large cities integrated into the European economy; everything else degenerated. The rate of degradation exceeded the rate of growth of centers.
For the Moldovan case, Gorzeliak’s distinction between two types of periphery is fundamental. Structural periphery – regions that never had a competitive economic base. Their degradation is predictable and largely irreversible without external intervention. Transformational periphery – regions that have lost their base as a result of deindustrialization, but have retained their human capital and infrastructural potential. Reindustrialization is possible here with the right policy. Most of Moldova’s regions belong to the first type, but a few nodes – Balti, some areas along transport corridors – are potentially of the second type.
OECD documents the dynamics of attempts at adjustment – and their systemic failures. Three lessons from Romania and Bulgaria are particularly significant.
First, EU structural funds do not equalize – they reinforce concentration at the outset. The money is formally channeled to lagging regions, but is absorbed by those territories that have the administrative capital to develop them – i.e. large cities and capitals.
Second, regional policy without local government reform does not work.
Third, proximity to the EU border creates local growth centers that are not related to the national economy – enclave modernization without multipliers for neighboring territories.
The Golden Growth report poses the most uncomfortable question: why has Eastern Europe, with all the growth of the 2000s, not caught up with the West structurally? The answer shatters several narratives. Growth was real but extensive – it was built on three temporary factors: cheap labor, cheap capital, and access to Western markets. None of these is a sustainable source of convergence. Eastern Europe has fallen into the subcontractor’s trap: it has occupied the niche of assembly production, but the added value remains low, rents go to head offices. Moldova has not even reached this level – it remains a labor supplier for countries that are themselves subcontractors.
Moldova is not just a belated Romania. Moldova is smaller than any Romanian region – the minimum efficient scale for most industries is unattainable domestically. Moldova is headed for depopulation under current trends, which will make many areas unviable regardless of policy. Moldova has Transnistria with parallel institutions and Gagauzia with autonomous powers – multiplying the costs of division. And Moldova demonstrates acute energy vulnerability, clearly confirmed by the state of emergency declared in March 2026: a country dependent on a single transmission line reproduces a peripheral logic at the level of basic infrastructure.
III. Hypercentralization: Chisinau as a single city
Jeffrey Henderson introduced the concept of primate city – a city whose size is disproportionate to the size of the national economy and the settlement system as a whole. According to Henderson’s formal criteria, Chisinau is a primate city with a large margin. Balti, the second largest city, is so much smaller than the capital that the urban system is actually one-level: there is Chisinau and there is everything else without gradation. This is an extreme case even by the standards of post-socialist countries – Romania, with all the primacy of Bucharest, has Cluj, Timisoara, Iasi, Brasov.
Henderson identifies three sources of primacy – colonial legacy, political centralization and weakness of the urban system. In the Moldovan case, all three are present.
Soviet legacy: Chisinau was the administrative center of the Union Republic, and after independence this structure was not dismantled – it was inherited. All roads in Soviet Moldova led to Chisinau literally: the transportation network was designed for administrative logic, not economic connectivity.
Political centralization: Moldova remains one of the most centralized countries in Europe in terms of fiscal indicators. District budgets are formed predominantly from transfers. This reproduces a politically stable equilibrium: decisions are made in the capital, resources are concentrated in the capital, and firms and people travel to the capital for access to decisions and resources.
Henderson emphasizes the mechanism by which capital extracts rents from the periphery. Fiscal centralization pumps fiscal resources from the districts to the center and returns them through transfers – incompletely and distorted. Monopsony for skilled labor: the only place in the country where a doctor, lawyer or engineer can expect an adequate salary is Chisinau. This is a structural erosion of human capital from the regions, which is self-replicating regardless of anyone’s ill will.
The East Asian experience of managing urban dominance, as documented by the World Bank, offers several fundamental lessons. Attempts to administratively limit the growth of capital have failed everywhere. Direct bans, registration restrictions, and administrative barriers do not stop concentration, but only move it to the informal sector. Moldovan political rhetoric periodically appeals to the idea of “unloading” Chisinau through administrative measures. Only the creation of real alternatives works – through fiscal decentralization, advanced infrastructure for secondary centers, reform of land relations.
Edward Glaeser convincingly proves that concentration is effective – the agglomeration effect is real and measurable. Moldova’s IT sector is a clear proof: it emerged and concentrated in Chisinau not by administrative decision, but because the agglomeration effects in this sector are particularly strong. Attempts to create IT clusters in the districts by administrative methods predictably failed.
But Glazer’s logic has an important limitation in the Moldovan context. His argument about mobility as the main instrument of poverty alleviation works for the American context, where mobility means moving from depressed Detroit to growing Houston within one country. For Moldova, mobility means mainly emigration – moving to Romania, Germany, Italy. This is not internal mobility redistributing resources within the national economy – it is a structural outflow of human capital, devastating both the province and, in the long run, Chisinau itself. Glaser works within a framework where the nation-state is a given. For Moldova, this assumption is not obvious.
Moldova cannot solve its spatial problem internally. The scale of the country makes any purely domestic spatial policy insufficient. The real alternative to Chisinau’s primacy is not Balti as a second center, but the functional integration of Moldovan space into Romanian and European space. Iasi is closer to the north of Moldova than Chisinau. This is not a political thesis about unification – it is an economic and geographical fact.
IV. Institutional trap: why reforms do not work
Douglass North and Mushtaq Khan provide complementary but fundamentally different lenses for analyzing the Moldovan case. North explains why reforms in Moldova are not taking root structurally. Khan reveals exactly who has a vested interest in making them not take root – and why this is rational.
Norse warns: formal institutions can be changed quickly; informal ones cannot. Moldova after 1991 undertook precisely the kind of reform that Norse describes as deliberately insufficient: replacing formal rules while retaining an informal institutional matrix. The constitution, the property laws, the judicial system – all of these were rewritten according to Western models. But the informal rules – how decisions are actually made, who to call to solve a problem, what it means to “negotiate” – remained Soviet in their logic. Not because anyone intentionally kept them, but because they were the only working coordination mechanisms that people knew.
Douglas North shows that a country’s path is determined by tipping points – historical moments when choices close some possibilities and open others.
In the Moldovan case, three such points can be identified. In 1991-1994, unlike the Baltic states, Moldova chose a gradual path: the Soviet nomenclature converted administrative capital into economic capital without a significant break in continuity. In 2003-2009, courts, prosecutors, regulators were integrated into the system of political control so deeply that their formal independence became a fiction. In 2009-2014 – paradoxically – it was the period of the most active movement toward European standards that coincided with the most massive institutional failure: a billion-dollar bank fraud.
According to Norse, this is not a paradox: reforms created new formal opportunities that were immediately exploited through old informal mechanisms.
Norse’s criterion for institutional quality – transaction costs – provides an operational way to measure the problem. The costs of protecting property rights remain abnormally high: formal property rights require constant defense costs, which in itself is an institutional failure. Moldovan business prefers informal arrangements with personal sanctions to formal contracts with judicial protection – a rational adaptation to the environment, but an adaptation that reproduces the problem. Market entry costs are high not because of formal barriers, but because of the need to build relationships with regulators and fit into existing networks.
Douglas North gives a precise diagnosis of the Moldovan reform cycle: a good law is passed – a new body is created – the body is filled with old personnel with the same informal rules – in two or three years the body functions according to the old logic in a new institutional package. This is neither malice nor incompetence. This is a systemic property of institutional change: when the informal matrix does not change, it digests formal reforms.
Mushtağ Khan looks at the same reality through a different lens – and sees not inertia, but rational sabotage. In his typology, Moldova represents competitive clientelism with elements of fragmented settlement: several elite groups compete for control of state resources through the political process. None has enough power for sustainable long-term policies, each new coalition partially reverses the decisions of the previous one. This creates a planning horizon for elites limited to the electoral cycle – making productive use of rents structurally unlikely.
Several organized groups with different positions in the political settlement can be identified.
Business-political clans control both large business assets and political representation – their interest is in maintaining asymmetric access to state contracts.
Bureaucratic networks within the state apparatus control administrative discretion at key points – customs, tax, courts – and are interested in maintaining opacity as a source of informal income.
Regional elites are interested in transfer dependence on the center with maximum autonomy in spending transfers.
External players – donors, investors, diaspora – systematically underestimate the real balance of power.
The theft of a billion dollars from the Moldovan banking system in 2014 is a perfect case study for Khan’s analysis. The operation required the simultaneous control or neutralization of the National Bank, the judiciary, the prosecutor’s office, the parliamentary majority and the media space. This is not a coincidence of weaknesses – it is a coordinated exploitation of a real balance of power. Reforming banking regulation without changing the political settlement will not prevent the next operation.
Norse and Khan’s synthesis leads to one practical conclusion that contradicts the standard recommendations of international organizations: technical improvement of institutions without changing the political settlement does not work. The best property rights law will not protect property rights if courts are embedded in clientelist networks. Real institutional change is possible only through a change in the balance of power – either through external pressure of sufficient intensity or through the formation of an internal coalition of players interested in productive institutions: export-oriented business, the IT sector, the diaspora with investment intentions.
V. Forgotten places take revenge: the political economy of degradation
Philip McCann’s examination of British regional failure comes to a conclusion that should discourage optimists: none of the equalization strategies employed has produced a sustainable result – even in one of the richest and most institutionally advanced countries in the world. This is a fundamentally important framing: if regional inequality is not being addressed there, it is not a problem of lack of resources. It is a structural property of modern capitalist economies.
McCann documents the failures of each of the tools used.
Subsidizing enterprises in depressed regions: enterprises closed down after the subsidies ended.
Special economic zones: the effect was localized and temporary.
Infrastructure investments: improved connectivity, but often accelerated the outflow of population to the center.
Decentralization: had political results, but economic results were modest.
McCann introduces the concept of the “connectivity trap”: when it becomes easier to get to the center, it becomes easier to leave the periphery for the center, rather than vice versa.
Andrés Rodríguez-Pose offered perhaps the most politically resonant work in economic geography of the last decade: “The Revenge of Places That Don’t Matter.” His thesis is simple and devastating to the standard narrative: populism, nationalist voice, and anti-elite revolt are not the cultural response of the uneducated masses. It is a rational political response to economic oblivion.
“Places that don’t matter” are not just poor regions. These are regions that have ceased to matter for economic policy – who were told “move where the jobs are” and were given policies designed for other places and other problems.
The recommendation to “move” is perceived not as economic advice but as a value signal: your place is not worth the investment, your attachment to it is irrational, your life here is your personal problem. This creates a deep sense of disrespect, which is a more powerful political motivator than material poverty.
The key variable is trajectory, not absolute level. A region that was prosperous and has become depressed is more politically explosive than a region that has always been poor. The loss of status is more painful than its absence. This explains why former industrial areas vote for populists much more actively than traditionally poor agrarian areas.
For the Moldovan context, Rodriguez-Rose’s thesis has a direct political dimension. The Moldovan periphery has not yet produced a political explosion as dramatic as the British Brexit or the American Trump. But the structural conditions for it are being systematically created: the accumulated sense of regional oblivion, the perception of elites as an alien and incompetent group, the concentration of opportunities in the capital with the degradation of everything else. The Armenian “velvet revolution” of 2018 and the Moldovan electoral shifts of recent years demonstrate that the mechanism is already at work.
OECD Rural Policy Reviews honestly record that most standard rural and regional policy instruments either do not work or work much weaker than expected. There is no one-size-fits-all recipe. Each successful case is specific – a particular place, a particular time, a particular combination of internal resources and external conditions. This is an argument for an adaptive policy that starts with a site-specific diagnosis rather than selecting a tool from a standard set.
Only a few patterns work sustainably.
Policies that build on real local competitive advantages rather than imposing one-size-fits-all tools.
Long-term consistency with a 15-20 year horizon.
Investment in human capital locally – education and health care available outside major cities.
Integration into functional economic zones rather than autonomous development within administrative boundaries.
And – perhaps most importantly – grassroots initiative with external support: programs that grow out of local initiatives are systematically superior to those designed by external experts and imposed from above.
VI. What to build: clusters, cities, linkages
The three sources for the next block – Michael Porter, the World Bank’s Competitive Cities, and UN-Habitat’s Urban-Rural Linkages – form a constructive twist in the analysis. They ask not why concentration is occurring, but what can be built in place of a monocentric model. Applied to the Moldovan context, each of the three scenarios requires an honest assessment of applicability.
Dimitri Tăreburca, expert in real estate development and valuation
Scenario 1: Clusters
Michael Porter argues that competitive advantage is not created in capitals by administrative decision but where specific conditions arise — historical, institutional, infrastructural. For Moldova, the question is: are there territories outside Chișinău where at least one element of Porter’s “diamond” already exists in embryonic form?
The wine cluster of the central regions is the most obvious candidate. Factor conditions exist: soils, climate, centuries-old winemaking tradition, accumulated human capital. Related industries are partially present: nurseries, barrel production, logistics. The European market can act as a demanding buyer — provided quality standards are met. The main obstacle is not economic but institutional: the Moldovan wine sector has historically been an object of political economy, and control over export channels distorts the competitive environment. Likelihood of effect — moderate, contingent on institutional reform of the sector.
Chișinău’s IT cluster is the most successful example of organic cluster growth — not created administratively, but emerging through agglomeration of competencies. Soviet technical education provided the initial stock of specialists, and the IT sector is among the least distorted by clientelist networks. The main threat — emigration of programmers to Romania, Germany, Netherlands. The cluster is sustainable only if Moldova remains attractive enough to retain a critical mass of specialists. Likelihood of effect — high in Chișinău, low outside. Does not ensure spatial equalization.
The agro-industrial cluster of the south — Găgăuzia and adjacent territories — has specific agro-climatic conditions for early vegetable and fruit production. Găgăuz autonomy simultaneously creates an obstacle to coordination and an opportunity for flexible attraction of external investments, including Turkish. Main obstacle — absence of supporting industries: processing, cold logistics, certification are practically absent. Likelihood of effect — low without targeted investment in processing infrastructure.
Scenario 2: Secondary cities
The World Bank identifies secondary cities as key agents of decentralized growth. For Moldova, the question immediately confronts structural specificity: are there secondary cities capable of becoming real economic centers?
Bălți — the only real candidate, with a population of around 100,000. The industrial base from the Soviet period is partially preserved. Labor market sufficient for medium-scale specialization. But Bălți is trapped in secondary status: not large enough for independent agglomeration dynamics, not small enough for specialization without alternatives. Quality of urban governance — the most significant predictor of success per World Bank methodology — remains the main limitation. Likelihood of effect — moderate, contingent on institutional reform of local administration.
Ungheni — a border city with Romania — shows moderately high potential. Proximity to Iași offers the possibility of functional integration into the Romanian economic system. This is exactly the strategy the World Bank describes as most effective for small cities: specialization in a specific function within a broader system, not autonomous development.
The Chișinău suburban area — Orhei, Hîncești, Strășeni — has the highest likelihood of organic growth through functional integration into the Chișinău agglomeration: housing, logistics, light industry. This is a process requiring infrastructural support, not creation from scratch.
Moldova’s urban system suffers from a structural deficit of intermediate level: between Chișinău and district centers, there is no functional intermediate city level. This makes polycentric development significantly more complex than in countries with developed urban hierarchies.
Scenario 3: Urban-rural linkages
UN-Habitat is the most directly applicable source for Moldovan specificity. About 30% of the population is employed in agriculture, a significant share of GDP is generated by the agro-food sector, and most depressed territories are rural. At the same time, urban-rural linkages in Moldova are among the weakest in the region — meaning the greatest potential for improvement with relatively small investments.
The Moldovan food chain demonstrates classic value capture by intermediaries at the expense of producers. Farmers receive a small share of the final price — processors, retail networks, exporters capture most of the margin. The solution lies not in subsidizing producers but in investing in market access infrastructure: wholesale markets, certification, logistics hubs, cooperative structures. Each of these tools requires an urban node — specifically a secondary city, not the capital — as an organizational center.
Moldova is one of the world leaders in the share of remittances in GDP — historically around 15–20%. The vast majority of remittances are used as consumer transfers: housing, consumer goods. Transformation into productive investments is minimal. This is not irrational behavior — it is a rational response to an institutional environment where productive investments are high-risk.
According to Norsu, the problem is not the absence of capital — it exists in the form of remittances. The problem is the lack of institutional infrastructure to transform it: secure property rights, accessible financial services in rural areas, predictable small business regulation.
Moldovan agriculture suffers from extremely weak urban-rural information flows regarding technologies and management practices. The technology gap between best practices and the average Moldovan producer is huge — and not reduced through market mechanisms. Investments in digital agricultural advisory services, university-agricultural producer partnerships, pilot demonstration farms — are tools with high potential effect at relatively low cost. According to OECD, this is one of the few instruments with consistently positive effectiveness evaluation.
Conclusion: An unavoidable choice
Synthesis of theoretical and empirical works leads to several conclusions, united by one quality: they are inconvenient for political rhetoric of any kind.
- Concentration in Chișinău is not a problem to stop but a fact to leverage. Administrative restraint of capital growth will not create secondary centers — it will only reduce overall productivity. The right policy — capitalize on agglomeration effects for the benefit of the entire country through fiscal redistribution and quality public goods available outside the capital.
- Institutional reform is a necessary condition for any other policy — but impossible without changing the real balance of power. Technical improvements without political restructuring are absorbed by existing informal networks. European integration is the only external pressure of sufficient intensity to change this balance — but only if it imposes real costs for non-compliance, not just formal compliance.
- The demographic crisis is not just one problem among others, but a systemic constraint that renders some standard tools irrelevant. For areas approaching demographic non-viability, economic growth policy is meaningless. They need policies maintaining the dignity of remaining people — an honest, not populist response.
- Moldova cannot solve its spatial problem internally. This is not a recognition of capitulation — it is recognition of scale. Spatial problems of small countries are solved through integration into larger economic spaces, not domestic regional policy. Functional integration of Moldovan space into Romanian and European space is not a political unification thesis, but an economic-geographic imperative.
- Finally — perhaps the main conclusion — there is no policy that simultaneously maximizes aggregate growth and minimizes regional inequality. These are two different targets with a real trade-off. Moldova faces a choice all reviewed countries made, explicitly or implicitly. The Baltic states sacrificed demography for institutional quality. The Balkans sacrificed equalization for capital growth. Post-Soviet small economies largely made no choice — and achieved neither.
Choice between efficiency and political stability, growth and equity, mobility and place — is a political, not technical decision. Economists and analysts can describe the parameters, but cannot make it on behalf of society. The longer this choice is postponed, the fewer options remain.
P.S. The article is based on a synthesis of works on spatial economics, regional development, and institutional economics. The author’s views are independent analytical judgments.
