D. asks me that question, citing Morocco, BA, and Paris. Here are a few factors militating in favor of such cafes:
1. The weather should be reasonable. This militates in favor of Mediterranean climates, with Paris eking through nonetheless. It hurts much of Asia.
2. The broad highways and thoroughfares should be removed from where the cafes might go. This factor harms Los Angeles, which otherwise has excellent weather, and helps La Jolla. Note that BA and some of the larger Moroccan cities were designed and built up around the same time, based on broadly European models, and to fit early 20th century technologies.
3. Street crime must be acceptably low. Bye bye Brazil.
4. Pollution should be fairly low, otherwise sitting outside is unpleasant. This harm many Indian and Chinese cities.
5. Streets must not be too steep. Sorry La Paz, and yes here at MR we adjust steepness coefficients by altitude.
6. Skyscrapers must not be too plentiful. This harms Manhattan, because the sunlight is mostly blocked.
7. Explicit or implicit marginal tax rates on labor should be relatively high. Another boost for the Mediterranean. And is cafe culture therefore correlated with smoking culture?
7b. Explicit or implicit land rents should be “low enough.” After all, they have to be willing to let you sit there all day. Just try that in midtown Manhattan.
8. The cities should have mixed-use neighborhoods, well-connected to each other by foot, conducive to many diverse groups of people walking through. This hurts many parts of the United States and also some parts of Latin America. It is a big gain for Paris.
9. The city dwellers need some tradition of “being alone,” so that these individuals use the cafe to connect to the outside. You will note that in many parts of Italy, the people-watching street cafe is outcompeted by the “stationary street conference, five guys who know each other really well yelling at each other about who knows what?” They never get around to that cafe chair. So the city needs some degree of anonymity, but not too much. This harms some of the more traditional societies found around the Mediterranean. On the other side of the distribution, too strong a tradition of television-watching hurts cafe life too.
10. Another competitor to the people-watching street cafe is the zócalo town square tradition of Mexico. I myself prefer the centralization of the zócalo (though admittedly it does not scale well fractally). So the city also has to fail in providing just the right kind of parks and park benches and focality in its very center. Surprise, surprise, but dysfunctional local public goods are by no means unheard of around the Mediterranean, Paris too, BA, and cities such as Casablanca.