Why are you equating size of settlement with presence of surviving written literature? The two are in no way correlated. We have a plethora of sources from democratic Athens, including tragedy, comedy, history, and philosophy, and that city was absolutely tiny compared to Rome as far as population. We have only scraps from her contemporary equals in population--Corinth, Miletus, Syracuse, for instance.

Meanwhile, Carthage was one of the biggest cities in the Mediterranean in the Hellenistic period and barely a word of written literature survives from there. Throw in Gadir (Cadiz) as well. Or Tyre, or Sidon. The list of what survives today has more to do with subject matter, tastes, and the accident of preservation.

There were plenty of texts being written in the early Roman period. Livy drew upon the now-lost works of Quintius Fabius Pictor (3rd century) and Lucius Calpurnius Piso Frugi. Ennius and Naevius both wrote epic poems on Roman subjects, only fragments of which survive. Plautus and Terrence are well-preserved examples of early Roman comedy, but they were just two of many poets who were producing for the stage at the time.