Urbanization and the Geography of Development

Abstract

This paper focuses on several interrelated key questions on the geography of development. Although we herald cities with their industrial bases as 'engines of growth,' does industrialization in fact drive urbanization?1 What economic activities do cities of different sizes undertake? Does this change as countries develop? If so, what are the policy implications? Do development policies have a big-city bias? If so, what does this imply for growth and inequality, and what are appropriate place-based policies? Should countries have policies concerning optimal city sizes or city-size distributions? Urbanization is central to the development process. Employment shifts out of agriculture into industry, and industrial production proceeds most effectively in cities, with their agglomeration economies. Cities are thus viewed as engines of growth. While such relationships appear in the data, the process is not straightforward. Among developing countries, changes in income or industrialization correlate only weakly with changes in urbanization. This suggests that policy and institutional factors may also influence the urbanization process, weakening the link between industrialization and urbanization. The relationship between industrialization and urbanization is absent in Sub-Saharan Africa. Finally, the author will look at city sizes and city-size distributions. Factors determining both aspects are complex and poorly understood. It is hard to be proscriptive about either individual city sizes or overall city-size distributions. The best policies strengthen institutions in the relevant markets so that market forces can move the economy toward better outcomes. That said, the role of public-private interaction and the details of what institutional reforms different situations require are controversial.