The mass of the earth can be considered concentrated at its center for calculation of the force between the earth and the object on or beyond its surface. With the mass of the earth being the same if the radius decreases by 1% it means the distance between the earth and the object reduces by 1%, other things being the same. Since the acceleration due to gravity is inversely proportional to the square of the radius of the earth R, the decrease in R will result in an increase in g.
The 1% decrease in R means it decreases by 0.99 times. So, the increase in g will be 1/(0.99)² = 1.02 times. That means the value of g increases by 2%.
