Abstract
In this chapter, we study migration to the city and its effects on urbanization. In previous chapters, we studied how the structural transformation affects economic growth and, in particular, how migration to the modern sector may alter private sector behavior. Here, we focus on the question of the best pace of urbanization as it relates to the allocation of rural and urban government services. Our motivation comes from the fact that the vast majority of governments around the developing world are concerned about the adequacy of public goods provision and the crowding associated with rapid urbanization (Bloom and Khanna 2007). In this sense, the structural transformation, which generally raises economic growth, can occur too quickly. A second important issue we address is the role politics plays in exacerbating rural–urban inequalities. As first stressed by Lipton (1977), the disproportionate political power of urban interests (the “urban elite”) in some developing countries’ economic policies may distort the allocation of government services, exacerbate rural–urban inequalities, and intensify migration beyond efficient levels.
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Notes
- 1.
The concern is so significant that 73 % of the governments surveyed have designed policies with the goal of slowing urbanization. A major concern over urbanization is the ability to finance the necessary public infrastructure associated with a growing urban population. According to some estimates, trillions of dollars of investment will be needed to extend the urban infrastructure due to the high urbanization rates in Asia.
- 2.
In addition to providing a voting-based theory of urban bias, Majumdar et al. (2004) empirically document the extent to which public services in urban areas exceed those in rural areas. McCormick and Wahba (2003) examine the effects of an urban bias in the allocation of public sector jobs. Bezemer and Headey (2008) discuss continuing concerns over the presence of an urban bias in domestic and international development policy. Bates (1981) focuses on how urban bias affects the pricing of agriculture products.
- 3.
For the purpose of the issue that we address, the apparent policy bias against the poorer and less developed rural sector during the development process, distinguishing the sectors by differences in traditional and modern technologies seems reasonable. There are certainly other differences between the rural and urban sectors that we ignore. Also by focusing on an “urban sector”, we do not address the expansion of cities across geographic areas or heterogeneity in city types. For an analysis of systems of cities, where cities specialize in the production of different goods see Henderson (1974), Black and Henderson (1999), Duranton and Puga (2004), and Henderson and Wang (2005).
- 4.
Clear examples of where such policies have been carried out include the former Soviet Union and China. See also Sect. 8.6.
- 5.
The next three sections are based on Mourmouras and Rangazas (2013). In an unpublished appendix, we consider the closed economy case. The appendix can be found as supplement to the article on the Journal of Economic Geography’s Web site.
- 6.
Note that we are modeling government services as publically provided private inputs. In some cases, it is more appropriate to treat government services as flowing from impure public goods. We examine this case in Sect. 8.3.
- 7.
The lost work-time associated with migration can also be given a Harris and Todaro (1970) interpretation in that those arriving in the city endure a period of search unemployment.
- 8.
For proofs of this result and others in this chapter, see Mourmouras and Rangazas (2013).
- 9.
See Bloom and Khanna (2007) for a discussion of the optimistic and pessimistic views of urbanization.
- 10.
Cities may also contain other efficiency advantages such as improved matching between employee and employer and learning spillovers from increased worker interaction (Duranton 2008). Rosenthal and Strange (2004) point out that identifying the precise source of these efficiency advantages is extremely difficult. Moretti (2004a) discusses the difficulty in establishing the presence and magnitude of human capital externalities in cities. Henderson (2010) argues that urbanization per se does not increase growth rates, although growth rates may increase when the population becomes concentrated in very large cities. In Chap. 7, we mentioned evidence suggesting that there are learning externalities related to the average human capital per person in the community where one lives. Moretti (2004b) and Liu (2014) find that the average human capital per worker in a city raises the productivity of firms in the city, especially those that employ high human capital workers. Duraton (2014) reviews the literature and concludes that cities have a positive causal effect on worker productivity.
- 11.
An increase in the rural population actually reduces government services per worker in the rural sector for two reasons: crowding of the population near the public good and an increase in the population that cannot easily utilize the good.
- 12.
Our discussion suggests that an urban bias in the provision of effective government services is guaranteed. This is not the case because if both \( \pi_{t - 1} \) and \( \varphi_{t} \) are small enough, then \( \left[ {\left( {1 - \phi_{t} } \right)\left( {1 - \pi_{t - 1} } \right)} \right]^{1 - \varepsilon } /\left[ {\pi_{t - 1} + \phi_{t - 1} \left( {1 - \pi_{t - 1} } \right)} \right]^{1 - \xi } \) could be large enough to make \( \tilde{g}_{t} > g_{t} \). This situation is more relevant during the early stages of growth when urban crowding is not an issue, and the city would have a small and slow-growing population.
- 13.
Duraton (2014) provides a discussion of the empirical evidence behind different mechanisms through which locating in cities can affect worker productivity. He also discusses the factors that limit worker productivity in developing countries, which is the focus of this chapter and the next section in particular.
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Das, S., Mourmouras, A., Rangazas, P.C. (2015). Urbanization. In: Economic Growth and Development. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-14265-4_8
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