Growth and Urbanization. Growth Commission Workshop Danny Leipziger Vice-Chair Growth Commission March 19, 2007

Transcription

1 Growth and Urbanization Growth Commission Workshop Danny Leipziger Vice-Chair Growth Commission March 19, 27

2 The Basics and Some Questions The Basics Cities and Demographics Cities and Income Some Questions Cities and Policy Cities and Growth 2

3 Cities and Demographics 3

4 Future World Population Growth Will Be Mainly Urban Source: UN Urbanization Prospects 25 4

5 Almost All of that Population Growth Will Take Place in Cities of Poor Countries 9% 7% 18% 57% 91% 32% 5% 34% 2% Source: UN 5 Urbanization Prospects 25

6 Cities and Income 6

7 Urbanization and Per Capita Incomes Across Countries Strong link between urbanization and per capita incomes across countries Robust over different periods Most countries with per capita incomes > USD2,- > 6% urbanized; those with USD 1,/- mostly >5% urbanized or more % Urban Urbanization and Per Capita Incomes Source: WDI (25) GDP per capita 7

8 Urbanization and Income While relationship has regularity across countries; The relationship over time within countries varies. The US experience is illustrative once a threshold of urbanization is reached, growth takes off. Index: 188 value = U.S. Urbanization and GDP per capita Urbanization 188: : 79.1 GDP per capita 188: $3379 2: $34788 GDP per capita per cent urban But this is not universal Source: US Census, WDI, Johnston and Williamson (25) Adapted from Malpezzi and Lin (1999) 8

9 Urbanization and GDP Growth over Time Urbanization is necessary, but not sufficient for growth GDP per capita 196: 171 2: GDP per capita 196: : Indonesia Kenya Urbanization 196: 15% 2: 42% Urbanization 196: 7% 2: 2% GDP per capita 196: $448 2: $ GDP per capita 196: $2644 2: $ China Brazil Urbanization 196: 16%, 2: 36% Urbanization 196: 45% 2: 81% Source: WDI (25) GDP per capita Urbanization

10 Cities, Policies and Growth: What is the Role of Urbanization in a Growth Strategy? 1

11 Urbanization, Growth, and Policy Income growth does not take off without urbanization But, it is hard to explain when and why it does in a given country Some countries don t grow but continue to urbanize e.g., Africa why? Many have not been able to sustain rapid economic growth with urbanization while others have. Can these patterns be explained by policies? natural constraints? Idiosyncrasies? 11

12 Fast Growers In all countries with growth rates over 7% for the last 15 years or more, growth has been in cities. Will this always be the case? Growth (%) 12% 1% 8% 6% 4% 2% % -2% -4% -6% China Source: DDP Botswana Overall growth vs Agricultural growth Korea, Rep. Singapore Vietnam GDP growth Growth in Agriculture Taiwan, China M alaysia 12

13 For the Fast Growers Productivity Gains are in the Cities. Industrial productivity far outpaces agricultural productivity; Big gains from ruralurban migration; Is there evidence of increasing returns to scale of urbanization? Index of Productivity China: Index of Productivity by Sector Index-Agricultural Productivity Index-Industrial Productivity 13

14 Urbanization, Growth and Policy Question 1: Are agglomeration economies just part of the growth process? Or, do agglomeration economies drive growth? Collier attributes most of Asia s more rapid growth relative to Africa to earlier exploitation of agglomeration economies. Is this credible? What should governments do to promote these agglomeration economies? 14

15 Urbanization and Policy: Sustaining Rapid Growth Question 2: How to manage the downside of rapid growth in cities? Can India build the urban infrastructure to support industrialization and more urbanization? How can China handle the regional inequalities that have followed rapid growth? Will high land and housing costs disrupt the economy and the social fabric? More is expected of government in urban environments, this is much easier if urbanization and higher growth go hand-in-hand. 15

16 Policy Perspectives on Urban and Growth : Rural Romanticism? On the one hand, many want to reverse urbanization: A UN Survey found that most governments were pursuing policies to slow down or reverse migration to cities. This is possibly driven by concerns about the negative aspects of urbanization:poverty, crime and slums in cities

17 Urban vs Rural Poverty East Asia - Urban vs Rural Poverty East Asia Poverty Headcount (%)- $1/day EAP-Urban EAP-Rural Index (1993 value = 1) Urban share of population Total Poverty Headcount (%) GDP per capita SSA - Urban vs Rural Poverty Sub Saharan Africa Poverty Headcount (%)- $1/day SSA-Urban SSA-Rural Index (1993 value = 1) Urban share of population Total Poverty Headcount (%) GDP per capita Source: Ravallion (27), WDI. 17

18 While governments clearly worry about rapid urbanization There is little evidence suggesting that urbanization is impoverishing Poverty incidence is consistently lower in cities Even in stagnant Sub-Saharan Africa, poverty incidence has gone down some in the face of rapid urbanization In fast-growing East Asia, although inequality has increased, poverty has gone down dramatically with urbanization 18

19 An Alternative View on Urban Policy and Growth: The Neo-Classical City On the other hand, are those who think cities will spontaneously contribute to growth Eliminate distortions Let people move Liberalize the financial sector Provide local public goods. AND Livable cities will build themselves 19

20 A Broader Perspective on Urban Policy and Growth Urbanization appears to be essential for growth, poverty alleviation and jobs. If so, can we identify policies that can make it more effective? And limit the downside of urbanization 2

21 A Broader Perspective on Urban Policy and Growth Is there a middle ground between the agnosticism of neoclassical nostrums who would largely let markets determine urbanization outcomes and those romantic ruralists who would reduce the role of cities? If there is such a perspective, can we identify some of the main elements? 21