Urbanization and economic growth: the arguments and evidence for Africa and Asia

Abstract

The relationship between urbanization and development is a vital policy concern, especially in Africa and Asia. This paper reviews the arguments and evidence for whether rapid urban population growth can help to raise living standards. The main finding is that the development effects of urbanization and the magnitude of agglomeration economies are very variable. There is no simple linear relationship between urbanization and economic growth, or between city size and productivity. The potential of urbanization to promote growth is likely to depend on how conducive the infrastructure and institutional settings are. Removing barriers to rural-urban mobility may enable economic growth, but the benefits will be much larger with supportive policies, markets and infrastructure investments. Cities should use realistic population projections as the basis for investing in public infrastructure and implementing supportive land policies. Governments should seek out ways of enabling forms of urbanization that contribute to growth, poverty reduction and environmental sustainability, rather than encouraging (or discouraging) urbanization per se.