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Fridays Academy: Urbanization and Growth

Ignacio Hernandez's picture


Urbanization is increasing at a rapid pace. Between 2005 and 2030, the world’s urban population is expected to grow at an average annual rate of 1.78 per cent, almost twice the growth rate of the world’s total population. The proportion of people living in rural areas will shrink significantly after 2015. While increasing urbanization has led to greater per capita incomes and productivity, at the same time, it has led to increasing informal sector, greater urban poverty, increasing number of slums, scarcity of housing, spiraling urban real estate prices, and inadequate infrastructure facilities. Given this phenomenon of economic concentration in one area and spatial disparities elsewhere, the key issue is “should rural labor move to jobs or should jobs move to rural areas?”  Finance and labor do not automatically move towards poorer areas. Available evidence from across the world suggests that policy makers should strive to remove impediments to capital and labor flows and reinforce agglomeration economies.  This can be done by policy makers encouraging labor movement by abolishing national minimum wages, cutting unemployment benefits and social benefits, and abolishing rent control to increase supply of housing.  Similarly, improving business climate, increasing access to finance, including microfinance and availability of credit to small enterprises, and developing infrastructure services before firms move in, are likely to affect the decisions of firms in location of their productive activities.  Strengthening the capacity of provincial and local governments in provision of essential services would be key to reduce economic concentration and spatial disparities.

Meeting the Millennium Development Goals means addressing these development issues in cities. Urban planning is now not a luxury, but a necessity. The Commission of Growth and Development succinctly summarizes the urbanization process by noting that “If history is any guide, large-scale migration to the cities is part and parcel of the transformation economies must go through if they are to grow quickly…..Ultimately a successful city will need urban planning, building codes, and robust property rights. It will need drainage, sewerage, rapid transit, and a sophisticated financial system capable of mobilizing the funds for these. But accumulating this infrastructure, expertise, and sophistication takes time. Governments should avail themselves of whatever shortcuts they can find, including the experience and expertise of other cities that have gone through this turmoil before them”.


(From Raj Nallari and Indira Iyer's lecture notes)

Next week we will start "Corruption, Growth and Poverty".


Submitted by Frank on
It is important, that the experience we have with this relationship and with the external effects which comes with this development, must be used in the right way. We can save a lot of ressources and solve a lot of problems if we can show regions with a low urbanization state, what can be done and what has to be done.

Submitted by Anonymous on
We better get a handle on this now. Maybe china has the right idea 1 child per household

Given the global economic crisis which is leading to down turns in the global economies especially in the financial sectors, we want to believe that the estimated growth rate and urban shrink in the year 2030 may not be realised as was forcasted. Rather I think it is time for global economies to shift their attention towards the interior sites of their nations. This is because towns are already saturated and it is time to take the villages a step ahead and by so doing world development will spread and towns will be deconcentrated and with all the mobilities in the economies among the varios factors of production the financial sector will again withness some rejuvination.

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