Urbanization and the Geography of Development

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.