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Growing through cities in developing countries

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  • Duranton, Gilles

Abstract

This paper examines the effects of urbanization on development and growth. It begins with a labor market perspective and emphasizes the importance of agglomeration economies, both static and dynamic. It then argues that more productive jobs in cities do not exist in a void and underscores the importance of job and firm dynamics. In turn, these dynamics are shaped by the broader characteristics of urban systems. A number of conclusions are drawn. First, agglomeration effects are quantitatively important and pervasive. Second, the productive advantage of large cities is constantly eroded and must be sustained by new job creation and innovation. Third, this process of creative destruction in cities, which is fundamental for aggregate growth, is determined in part by the characteristics of urban systems and broader institutional features. The paper highlights important differences between developing countries and more advanced economies. A major challenge for developing countries is to reinforce the role of their urban systems as drivers of economic growth.

Suggested Citation

  • Duranton, Gilles, 2014. "Growing through cities in developing countries," Policy Research Working Paper Series 6818, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6818
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    References listed on IDEAS

    as
    1. Charlot, Sylvie & Duranton, Gilles, 2004. "Communication externalities in cities," Journal of Urban Economics, Elsevier, vol. 56(3), pages 581-613, November.
    2. Gilles Duranton, 2007. "Urban Evolutions: The Fast, the Slow, and the Still," American Economic Review, American Economic Association, vol. 97(1), pages 197-221, March.
    3. Kristian Behrens & Gilles Duranton & Frédéric Robert-Nicoud, 2014. "Productive Cities: Sorting, Selection, and Agglomeration," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 507-553.
    4. Nathaniel Baum-Snow & Ronni Pavan, 2012. "Understanding the City Size Wage Gap," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 88-127.
    5. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
    6. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    7. Gilles Duranton & Peter M. Morrow & Matthew A. Turner, 2014. "Roads and Trade: Evidence from the US," Review of Economic Studies, Oxford University Press, vol. 81(2), pages 681-724.
    8. Brülhart, Marius & Sbergami, Federica, 2009. "Agglomeration and growth: Cross-country evidence," Journal of Urban Economics, Elsevier, vol. 65(1), pages 48-63, January.
    9. Federico Cingano & Fabiano Schivardi, 2004. "Identifying the Sources of Local Productivity Growth," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 720-742, June.
    10. Carlino, Gerald A. & Chatterjee, Satyajit & Hunt, Robert M., 2007. "Urban density and the rate of invention," Journal of Urban Economics, Elsevier, vol. 61(3), pages 389-419, May.
    11. Rafael Di Tella & Sebastian Galiant & Ernesto Schargrodsky, 2007. "The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 209-241.
    12. Kristin Aarland & James C. Davis & J. Vernon Henderson & Yukako Ono, 2007. "Spatial organization of firms: the decision to split production and administration," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 480-494, June.
    13. Erica Field, 2007. "Entitled to Work: Urban Property Rights and Labor Supply in Peru," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1561-1602.
    14. Alberto F. Ades & Edward L. Glaeser, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 195-227.
    15. Coulibaly, Souleymane & Deichmann, Uwe & Lall, Somik, 2007. "Urbanization and productivity : evidence from Turkish provinces over the period 1980-2000," Policy Research Working Paper Series 4327, The World Bank.
    16. Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia," Journal of Development Economics, Elsevier, vol. 75(2), pages 333-371, December.
    17. Feler, Leo & Henderson, J. Vernon, 2011. "Exclusionary policies in urban development: Under-servicing migrant households in Brazilian cities," Journal of Urban Economics, Elsevier, vol. 69(3), pages 253-272, May.
    18. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
    19. Jan K. Brueckner & Harris Selod, 2009. "A Theory of Urban Squatting and Land-Tenure Formalization in Developing Countries," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 28-51, February.
    20. Bosker, Maarten & Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2012. "Relaxing Hukou: Increased labor mobility and China’s economic geography," Journal of Urban Economics, Elsevier, vol. 72(2), pages 252-266.
    21. Gilles Duranton, 2011. "California Dreamin': The Feeble Case for Cluster Policies," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(1), pages 3-45, July.
    22. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
    23. Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2010. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," American Economic Review, American Economic Association, vol. 100(3), pages 1195-1213, June.
    24. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 775-805.
    25. Deichmann, Uwe & Kaiser, Kai & Lall, Somik V & Shalizi, Zmarak, 2005. "Agglomeration, transport, and regional development in Indonesia," Policy Research Working Paper Series 3477, The World Bank.
    26. Jan K. Brueckner & Harris Selod, 2009. "A Theory of Urban Squatting and Land-Tenure Formalization in Developing Countries," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 28-51, February.
    27. J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4.
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    Keywords

    City Development Strategies; Transport Economics Policy&Planning; Labor Policies; National Urban Development Policies&Strategies; Urban Housing and Land Settlements;

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