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

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Author Info
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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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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  1. Anthony J. Venables, 2003. "Spatial Disparities in Developing Countries: Cities, Regions and International Trade," CEP Discussion Papers dp0593, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
    Other versions:
  3. Zuoquan Zhao, 2006. "A Spatial Model of Growth: Taking Technology Seriously," Discussion Papers on Entrepreneurship, Growth and Public Policy 2006-12, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
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