Poverty Reduction during the Rural-Urban Transformation : The Role of the Missing Middle

As countries develop, they restructure
away from agriculture and urbanize. But structural
transformation and urbanization patterns differ
substantially, with some countries fostering migration out
of agriculture into rural off farm activities and secondary
towns, and others undergoing rapid agglomeration in mega
cities. Using cross-country panel data for developing
countries spanning 1980-2004, the analysis in this paper
finds that migration out of agriculture into the missing
middle (the rural nonfarm economy and secondary towns)
yields more inclusive growth patterns and faster poverty
reduction than agglomeration in mega cities. This suggests
that patterns of urbanization deserve much more attention
when striving for faster poverty reduction.