Urbanization in a developing country: City size and population composition

Abstract

In developing countries typically there is a very high correlation between city size and educational attainment of the local population, which is less pronounced or even absent in developed countries such as Canada, the U.S.A., or the U.K. Two explanations are examined. First, the types of goods produced in larger cities require relatively high skill labor inputs. Second, public and perhaps private services demanded by higher skill people are only offered in larger cities. The paper econometrically tests these hypotheses for Brazil, estimating the elasticities of substitution (or typically complementarity) between high and low skill labor and the ‘bright lights’ effect for high versus low skill labor.