Urban Growth, Uninsured Risk, and the Rural Origins of Aggregate Volatility
AbstractThe level of urbanization has increased by over 5 percentage points per decade outside the developed world since 1960. Rapid urbanization was accompanied by fast economic growth and job creation in most parts of the world. However, notably Africa (and Latin America after 1980) has had a different experience: while growth in GDP per capita slowed significantly or even reversed, the rate of urbanization continued its fast pace. This paper aims to explain this by introducing an aggregate risk differential between the countryside and the city. Uninsurable expected risk will lead to rural-urban migration as a form of ex-ante insurance if households are liquidity constrained in incomplete markets and cannot overcome adverse shocks. Macroeconomic volatility finds its origins in risk-prone natural resource production including agriculture and has a robust positive effect on urban growth, especially when economic growth is slow. The effect stands up to the transitional view on urbanization of economies shifting from an agricultural to an industrial base.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2008/26.
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
urbanization; risk; natural resources; volatility; rural-urban migration;
Find related papers by JEL classification:
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-07-14 (Agricultural Economics)
- NEP-ALL-2008-07-14 (All new papers)
- NEP-GEO-2008-07-14 (Economic Geography)
- NEP-URE-2008-07-14 (Urban & Real Estate Economics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.