Urban Bias and Economic Growth in Cross-National Perspective

Abstract

In Michael Lipton's book Why People Stay Poor it is argued that urban bias generates needlessly slow and inequitable growth in less developed countries. This paper focuses on some part of this argument and tests it by cross-sectional multiple regression analyses. For the sixties and seventies it is demonstrated that countries suffering from urban bias, i.e., operationally from a large disparity between agricultural and non-agricultural incomes, did indeed grow more slowly than nations suffering from less urban bias. A causal interpretation of this relationship is favored in this paper. It depends on the assumption that rural-urban income disparities largely result from political and administrative decisions which interfere with allocative efficiency.