IDEAS home Printed from https://ideas.repec.org/p/emc/wpaper/dte501.html
   My bibliography  Save this paper

Urbanization as a Fundamental Cause of Development

Author

Listed:
  • David Mayer-Foulkes

    (Division of Economics, CIDE)

Abstract

I review the current theoretical and econometric literature on the economic dynamics of urbanization and its relation to economic growth. I then report research results on the short- and long-term impacts of urbanization on human development, using Gray and Purser's 1970-2005 database on human development indicators for 111 countries. The short-term analysis is an innovative fully instrumented clustered error growth regression using both levels and changes of independent variables to predict quinquennial changes in income, health, education and urbanization. The long-term analysis is a fully instrumented quantile estimate of levels on levels of the same variables. Explanatory variables include indicators of trade, FDI, institutions and physical geography. The results show urbanization is a significant cause of growth in the short term, but with a smaller magnitude than trade, institutions and FDI flows. However, in the long-term urbanization is a stronger cause of development than trade, FDI and institutional indicators. Urbanization policies must be a centerpiece of long-term economic development policies.

Suggested Citation

  • David Mayer-Foulkes, 2011. "Urbanization as a Fundamental Cause of Development," Working papers DTE 501, CIDE, División de Economía.
  • Handle: RePEc:emc:wpaper:dte501
    as

    Download full text from publisher

    File URL: http://www.economiamexicana.cide.edu/RePEc/emc/pdf/DTE/DTE501.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Davis, Donald R, 1998. "The Home Market, Trade, and Industrial Structure," American Economic Review, American Economic Association, vol. 88(5), pages 1264-1276, December.
    2. Rodgers, Dennis, 2010. "Urban Violence Is not (Necessarily) a Way of Life," WIDER Working Paper Series 020, World Institute for Development Economic Research (UNU-WIDER).
    3. Bertinelli, Luisito & Black, Duncan, 2004. "Urbanization and growth," Journal of Urban Economics, Elsevier, vol. 56(1), pages 80-96, July.
    4. Philippe Aghion, 2005. "Growth and Institutions," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 32(1), pages 3-18, March.
    5. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    6. Spencer, James H., 2010. "Health and the Urban Transition Effects of Household Perceptions, Illness, and Environmental Pollution on Clean Water Investment," WIDER Working Paper Series 066, World Institute for Development Economic Research (UNU-WIDER).
    7. David Satterthwaite, 2010. "Urban Myths and the Mis-use of Data that Underpin Them," WIDER Working Paper Series wp-2010-028, World Institute for Development Economic Research (UNU-WIDER).
    8. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
    9. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    10. Ludema, Rodney D. & Wooton, Ian, 2000. "Economic geography and the fiscal effects of regional integration," Journal of International Economics, Elsevier, vol. 52(2), pages 331-357, December.
    11. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    12. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.
    13. Helpman, Elhanan, 1989. "Monopolistic Competition in Trade Theory," Foerder Institute for Economic Research Working Papers 275470, Tel-Aviv University > Foerder Institute for Economic Research.
    14. Guha-Khasnobis, Basudeb & James, K. S., 2010. "Urbanization and the South Asian Enigma: A Case Study of India," WIDER Working Paper Series 037, World Institute for Development Economic Research (UNU-WIDER).
    15. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    16. Ben C. Arimah, 2010. "The Face of Urban Poverty: Explaining the Prevalence of Slums in Developing Countries," WIDER Working Paper Series wp-2010-030, World Institute for Development Economic Research (UNU-WIDER).
    17. E. Van de Poel & O. O'Donnell & E. Van Doorslaer, 2009. "The Health Penalty of China's Rapid Urbanization," Tinbergen Institute Discussion Papers 09-016/3, Tinbergen Institute.
    18. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    19. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    20. James H. Spencer, 2010. "Health and the Urban Transition: Effects of Household Perceptions, Illness, and Environmental Pollution on Clean Water Investment," WIDER Working Paper Series wp-2010-066, World Institute for Development Economic Research (UNU-WIDER).
    21. Freund, Bill, 2010. "Is There Such a Thing as a Post-Apartheid City?," WIDER Working Paper Series 048, World Institute for Development Economic Research (UNU-WIDER).
    22. Brülhart, Marius & Sbergami, Federica, 2009. "Agglomeration and growth: Cross-country evidence," Journal of Urban Economics, Elsevier, vol. 65(1), pages 48-63, January.
    23. Hsin-Ping Chen, 2002. "Urban externalities and city growth in Taiwan," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 36(4), pages 531-550.
    24. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    25. Feenstra, Robert & Markusen, James R. & Rose, Andrew K, 1998. "Understanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods," CEPR Discussion Papers 2035, C.E.P.R. Discussion Papers.
    26. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
    27. Baptista, Rui & Swann, Peter, 1998. "Do firms in clusters innovate more?," Research Policy, Elsevier, vol. 27(5), pages 525-540, September.
    28. Naude, Wim, 2010. "Suburbanization and Residential Desegregation in South Africa's Cities," WIDER Working Paper Series 024, World Institute for Development Economic Research (UNU-WIDER).
    29. Paul Isolo Mukwaya & Hannington Sengendo & Shuaib Lwasa, 2010. "Urban Development Transitions and their Implications for Poverty Reduction and Policy Planning in Uganda," WIDER Working Paper Series wp-2010-045, World Institute for Development Economic Research (UNU-WIDER).
    30. Terry Sicular & Yue Ximing & Björn Gustafsson & Li Shi, 2007. "The Urban–Rural Income Gap And Inequality In China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(1), pages 93-126, March.
    31. Basudeb Guha-Khasnobis & K. S. James, 2010. "Urbanization and the South Asian Enigma: A Case Study of India," WIDER Working Paper Series wp-2010-037, World Institute for Development Economic Research (UNU-WIDER).
    32. Arimah, C. Ben, 2010. "The Face of Urban Poverty Explaining the Prevalence of Slums in Developing Countries," WIDER Working Paper Series 030, World Institute for Development Economic Research (UNU-WIDER).
    33. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    34. Gundogan, Naci & Bicerli, Mustafa Kemal, 2009. "Urbanization and Labor Market Informality in Developing Countries," MPRA Paper 18247, University Library of Munich, Germany.
    35. repec:hhs:iuiwop:430 is not listed on IDEAS
    36. Janice E. Perlman, 2010. "Parsing the Urban Poverty Puzzle: A Multi-generational Panel Study in Rio de Janeiro's Favelas, 1968-2008," WIDER Working Paper Series wp-2010-027, World Institute for Development Economic Research (UNU-WIDER).
    37. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
    38. Gilles Duranton, 2008. "Viewpoint: From cities to productivity and growth in developing countries," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 689-736, August.
    39. Cuberes, David, 2009. "Early and Late Demographic Transitions: the Role of Urbanization," MPRA Paper 17720, University Library of Munich, Germany.
    40. Webster, Douglas & Bertaud, Alain & Jianming,Cai & Zhenshan, Yang, 2010. "Toward Efficient Urban Form in China," WIDER Working Paper Series 097, World Institute for Development Economic Research (UNU-WIDER).
    41. Mukwaya, Paul Isolo & Sengendo, Hannington & Lwasa, Shuaib, 2010. "Urban Development Transitions and their Implications for Poverty Reduction and Policy Planning in Uganda," WIDER Working Paper Series 045, World Institute for Development Economic Research (UNU-WIDER).
    42. Ranjith Dayaratne, 2010. "Moderating Urbanization and Managing Growth: How Can Colombo Prevent the Emerging Chaos?," WIDER Working Paper Series wp-2010-064, World Institute for Development Economic Research (UNU-WIDER).
    43. Henderson, J. Vernon, 2005. "Urbanization and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 24, pages 1543-1591, Elsevier.
    44. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    45. Bill Freund, 2010. "Is There Such a Thing as a Post-Apartheid City?," WIDER Working Paper Series wp-2010-048, World Institute for Development Economic Research (UNU-WIDER).
    46. Dayaratne, Ranjith, 2010. "Moderating Urbanization and Managing Growth: How Can Colombo Prevent the Emerging Chaos?," WIDER Working Paper Series 064, World Institute for Development Economic Research (UNU-WIDER).
    47. Henderson, J. Vernon & Wang, Hyoung Gun, 2007. "Urbanization and city growth: The role of institutions," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 283-313, May.
    48. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    49. Hirotsugu Uchida & Andrew Nelson, 2010. "Agglomeration Index: Towards a New Measure of Urban Concentration," WIDER Working Paper Series wp-2010-029, World Institute for Development Economic Research (UNU-WIDER).
    50. Perlman, Janice E., 2010. "Parsing the Urban Poverty Puzzle A Multi-generational Panel Study in Rio de Janeiro’s Favelas, 1968–2008," WIDER Working Paper Series 027, World Institute for Development Economic Research (UNU-WIDER).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Mayer-Foulkes & Grodecz Alfredo Ramírez Fuentes, 2011. "Ciclo de vida humano y ciclo de vida urbano: Urbanización y desarrollo económico," Working papers DTE 503, CIDE, División de Economía.
    2. Fhima, Fredj & Nouira, Ridha & Sekkat, Khalid, 2023. "How does corruption affect sustainable development? A threshold non-linear analysis," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 505-523.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004. "Agglomeration and economic geography," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608, Elsevier.
    2. Desmet, Klaus & Henderson, J. Vernon, 2015. "The Geography of Development Within Countries," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1457-1517, Elsevier.
    3. Fabien Candau, 2008. "Entrepreneurs' Location Choice And Public Policies: A Survey Of The New Economic Geography," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 909-952, December.
    4. David Mayer-Foulkes, 2010. "Divergences and Convergences in Human Development," Working papers DTE 481, CIDE, División de Economía.
    5. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, June.
    6. Kurt A. Hafner, 2015. "Tax Competition and Economic Integration," Review of Development Economics, Wiley Blackwell, vol. 19(1), pages 45-61, February.
    7. Stephen J. Redding, 2013. "Economic Geography: A Review of the Theoretical and Empirical Literature," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 16, pages 497-531, Palgrave Macmillan.
    8. Kristian Behrens & Frédéric Robert‐Nicoud, 2009. "Krugman's Papers in Regional Science: The 100 dollar bill on the sidewalk is gone and the 2008 Nobel Prize well‐deserved," Papers in Regional Science, Wiley Blackwell, vol. 88(2), pages 467-489, June.
    9. Yiming Zhou, 2019. "Home market effect, land rent, and welfare," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 561-580, June.
    10. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
    11. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    12. Toshiaki Takahashi & Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Spatial inequality, globalization, and footloose capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 213-238, May.
    13. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August.
    14. Theodore Tsekeris & Klimis Vogiatzoglou, 2014. "Public infrastructure investments and regional specialization: empirical evidence from Greece," Regional Science Policy & Practice, Wiley Blackwell, vol. 6(3), pages 265-289, August.
    15. Jang Ping Thia, 2008. "Evolution of Locations, Specialisation and Factor Returns with Two Distinct Waves of Globalisation," CEP Discussion Papers dp0875, Centre for Economic Performance, LSE.
    16. Epifani, Paolo, 2005. "Heckscher-Ohlin and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 645-657, November.
    17. Zeng, Dao-Zhi & Zhao, Laixun, 2010. "Globalization, interregional and international inequalities," Journal of Urban Economics, Elsevier, vol. 67(3), pages 352-361, May.
    18. Gallo, Fredrik, 2010. "Resisting economic integration when industry location is uncertain," European Economic Review, Elsevier, vol. 54(3), pages 467-482, April.
    19. Sabyasachi Tripathi, 2013. "Do Large Agglomerations Lead To Economic Growth? Evidence From Urban India," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 25(3), pages 176-200, November.
    20. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.

    More about this item

    Keywords

    Urbanization; Development; Urbanization policy;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:emc:wpaper:dte501. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alfonso Miranda (email available below). General contact details of provider: https://edirc.repec.org/data/cideemx.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.