Rural Settlements have an Max RGO size modifier, while Towns do not, they do however give a plethora of other advantages. There are a lot of balance reasons for this, and we want to make sure spamming towns and cities is not the goto.

In terms of specialization for cities and such, you commonly end up doing this on a province level. Production methods that use goods within their own province get production boost, (You're using those goods "Locally"). But most high tier production is done from towns, not rural locations.

So for example, you might have a town that specializes a bit in cloth manufacturing in the same province as a Wool and/or Cotton RGO. But that town is not directly on top of the wool farms, it is instead just nearby.

Another thing to keep in mind, the Max RGO size modifier is important, very important even, but it's not the only factor at play. (Do feel free to guess where this screenshot is from ;))