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The Urbanization Process and Economic Growth: The So-What Question

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  • Henderson, Vernon

Abstract

There is an extensive literature on the urbanization process looking at both urbanization and urban concentration, asking whether and when there is under or over-urbanization or under or over urban concentration. Writers argue that national government policies and non-democratic institutions promote excessive concentration--the extent to which the urban population of a country is concentrated in one or two major metropolitan areas--except in former planned economies where migration restrictions are enforced. These literatures assume that there is an optimal level of urbanization or an optimal level of urban concentration, but no research to date has quantitatively examined the assumption and asked the basic "so-what" question--how great are the economic losses from significant deviations from any optimal degrees of urban concentration or rates of urbanization? This paper shows that (1) there is a best degree of urban concentration, in terms of maximizing productivity growth (2) that best degree varies with the level of development and country size, and (3) over or under-concentration can be very costly in terms of productivity growth. The paper shows also that productivity growth is not strongly affected by urbanization per se. Rapid urbanization has often occurred in the face of low or negative economic growth over some decades. Moreover, urbanization is a transitory phenomenon where many countries are now fully urbanized. Copyright 2003 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 8 (2003)
Issue (Month): 1 (March)
Pages: 47-71

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Handle: RePEc:kap:jecgro:v:8:y:2003:i:1:p:47-71

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Web page: http://www.springerlink.com/link.asp?id=102931

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Cited by:
  1. Gregg Huff, 2012. "Gateway Cities and Urbanisation in Southeast Asia Before World War II," Economics Series Working Papers Number 96, University of Oxford, Department of Economics.
  2. Suedekum, Jens, 2006. "Human Capital Externalities and Growth of High- and Low-Skilled Jobs," IZA Discussion Papers 1969, Institute for the Study of Labor (IZA).
  3. Grossmann, Volker, 2011. "Structural Change, Urban Congestion, and the End of Growth," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48712, Verein für Socialpolitik / German Economic Association.
  4. Cem Karayalcin & Mehmet Ali Ulubasoglu, 2009. "Romes without Empires: Urban Concentration, Political Competition, and Economic Growth," Economics Series 2009_18, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  5. Uchida, Hirotsugu & Nelson, Andrew, 2010. "Agglomeration Index Towards a New Measure of Urban Concentration," Working Papers UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  6. Kevin Sylwester, 2008. "Foreign Aid and Urbanization in Developing Countries," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 7(2), pages 153-166, August.
  7. Daniel Arribas-Bel, 2008. "Kangaroos, Cities and Space: A First Approach to the Australian Urban System," GeoDa Center Working Papers 1011, GeoDa Center for Geospatial Analysis and Computation.
  8. Michel DIMOU, 2008. "Urbanisation, Agglomeration Effects And Regional Inequality : An Introduction," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 27, pages 7-12.
  9. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh.
  10. Zuoquan Zhao, 2006. "A Spatial Model of Growth: Taking Technology Seriously," Papers on Entrepreneurship, Growth and Public Policy 2006-12, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  11. Anthony J. Venables, 2003. "Spatial Disparities in Developing Countries: Cities, Regions and International Trade," CEP Discussion Papers dp0593, Centre for Economic Performance, LSE.
  12. Behrens, Kristian & Gaigné, Carl & Ottaviano, Gianmarco Ireo Paolo & Thisse, Jacques-François, 2003. "Inter-regional and International Trade: Seventy Years After Ohlin," CEPR Discussion Papers 4065, C.E.P.R. Discussion Papers.
  13. Henry Overman & Anthony J. Venables, 2005. "Cities in the Developing World," CEP Discussion Papers dp0695, Centre for Economic Performance, LSE.

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