Notes on a Talk Regarding Urbanization in Developing Countries by Dr. Ben Zou
Summary
Urbanization in countries is following a different pattern than it used to, and is happening in some sense too early. Yet overall, urbanization is good.
Traditional Model of Urbanization
Agricultural -> Industrial -> Service
This was the rough model followed by Western countries and the Asian Tigers in urbanization/development. Yet developing countries now have less of a manufacturing base due to existing manufacturing capabilties that have a comparative/absolute advantage (i.e. China).
Historically cities in the Western world were the most populous - now megacities in developing world are the larger ones (for example, Dhaka) and more densely populated as well.
- The greater population density may be due to less manufacturing jobs which forces people to seek employment in the city even if they may not necessarily have many opportunities. Also, low income from farming so they aggregate in cities (this “revealed preference” indicates cities are still good)
- Could be disastrous: see this anecdotal account about Africa in the 1900’s, specifically the section titled “Bayayes”.
- One advantage that developing cities enjoy is that they can learn from historical urbanization mistakes - and “leap frog” them.
- The greater population density may be due to less manufacturing jobs which forces people to seek employment in the city even if they may not necessarily have many opportunities. Also, low income from farming so they aggregate in cities (this “revealed preference” indicates cities are still good)
On the importance of manufacturing jobs
- Provide low barrier jobs that do not require much (if any) higher education. Lead to increases in human capital and “middle class” in the long run.
Interesting Ideas
- Clusters of factories are more productive (this is called external economies of scale or agglomeration economies).
- This is one of the key benefits of cities, not just factories, because they cluster pools of talent with capital.
- Cities are better for the environment on a per capita basis.
- Mostly because everything is concentrated.
- Average size of farms in the US: 446 acres; while average size of farms in India is 3.7 acres.
My thoughts
Policy recommendations are dangerous - economics is not like physics, in that variables can be controlled for with relative ease - so it is difficult to say to what extent they generalize (see this article, and also the Lucas Critique).
Top down solutions implemented by the state may be too “abstracted” and Platonic and crash against the jagged complexity of reality (refer to The Black Swan by Taleb and Seeing Like a State by James C. Scott).
Suggested further reading
- Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener Healthier and Happier by Edward L. Glaeser.