Urban Development Theories

URBP6002 | 2022–23

Week 12
Digital urbanisation

Tianren Yang
Department of Urban Planning and Design
The University of Hong Kong
Session Outline – Week 12: Digital urbanisation

1. Global Scale
– Technological changes and supply chain
– Digital marketplaces
2. Urban Scale
3. Summary

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 3

1. Global Scale: Technological changes and supply chain

• Digital technologies → Declining trade costs

• Facilitating GVC participation
– % population using the Internet: 1% (1993) → 60% (2016)

– High speed Internet enables firms in developing countries to link to GVCs

• Lowering logistics and coordination costs

– Customs performance (exports and imports) + delivery services

– Services trade (e.g. videoconferencing and telecommuting): 21% (2019) → 25% (2030)

• Developing countries may stand to gain the most

– In India, Indonesia, and Nigeria, firms with fewer than 10 workers account for more than 99
percent of the total. (cf. US: 45)

– Currently face higher trade and transport costs and have comparatively limited ICT infrastructure

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 4

1. Global Scale: Digital marketplaces

• Platform firms and E-commerce

– E-commerce share of retail sales: 13.8% (2019) → 24.5% (2025)
– China ($877bn) and US ($450bn) are the largest e-commerce markets – accounted for over half of
global e-commerce sales in 2017

4G network coverage (GSMA, 2018)

1. Global Scale: Digital marketplaces – digital divide
• A limited number e-commerce
platforms dominate most
markets

Ten largest global companies (FT500)

1. Global Scale: Digital marketplaces – digital divide

Introduction of Introduction of item

query translation title translation
1. Global Scale: Digital marketplaces – welfare gains

• The sizable welfare gains from e-commerce stem predominantly from

reductions in consumer prices and access to new products.
• Japan: e-commerce has driven down overall prices, raising aggregate welfare
by one percent (Jo, Matsumura and Weinstein, 2019)
– New varieties available through online shopping have raised welfare by 0.7 percent

– Increased inter-city price arbitrage has raised welfare by 0.06 percent

• US: displacement effects

– Reduction in employment in brick-and-mortar retail stores

– Shaper decrease in labour income

Source: Jo, Matsumura, and Weinstein (2019) URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 8
1. Global Scale: Digital marketplaces – welfare gains

• China: the first

nationwide e-commerce
expansion program
(2014–18) that connected
more than 40,000 Chinese
villages to e-commerce
– Logistical barrier: commercial
parcel delivery services

– Transaction barrier: online

payment methods

Source: Couture et al (2021) URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 9
1. Global Scale: Digital marketplaces – welfare gains

• Little evidence for income

gains to rural producers
and workers
• The gains are driven by a
reduction in cost of living
– For a minority of rural
households

– Younger, richer and in more

remote markets

Source: Couture et al (2021) URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 10
1. Global Scale: Digital marketplaces – regulatory challenges

• Potential conflicts of interest – platforms’ third party sales and their own retail
operations (e.g. Amazon and JD.com)
• Anticompetitive conduct
– Operating as both an upstream intermediation market for other firms and a downstream retail market for its final
customers

– Identify successful products in the marketplace so that they can then market their own branded version in the
same platform

• Predatory pricing
– Adopt temporary pricing strategies to gain more permanent advantages over their competitors and subsequently
raise prices

– Charging prices above marginal cost to other participants does not necessarily mean market power is at work

• Markups accumulated in superstar firms

Source: Couture et al (2021) URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 11
1. Global Scale
2. Urban Scale
– Teleactivities
– Metaverse
– Future digital world
3. Summary

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 12

2. Urban Scale: Teleactivities

• Types of human activities

– Mandatory (e.g. work to provide the economic basis)

– Maintenance (e.g. purchase and consumption to satisfy the physiological or biological needs as
well as obligations)

– Discretionary (e.g. leisure activities)

• Activities that occur remotely (nowadays usually via ICT)

– Allowing easier access to people, goods and information

– Thus affecting behaviours and the built environment (Circella and Mokhtarian, 2017)

– Multi-tasking

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 13

2. Urban Scale: Teleactivities

• Impacts on traditional personal activities (e.g. travel)

– Substitution, complementarity, modification or neutrality (Mokhtarian, 1990)

– Combinations of these mechanisms

• Andreev et al (2010)
– Substitution -> the most prevalent impact for telecommuting

– Complementarity -> for teleservices (particularly teleshopping) and teleleisure

• Impacts on the built environment

– Relocation ⬅ Increase virtual accessibility to some activities and services

– Reduced needs in certain sectors ⬅ Replacing activities that have been traditionally occurring in
conventional stores and facilities

– Reduced resistance to travel longer ⬅ Activity fragmentation

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 14

2. Urban Scale: Teleactivities

Teleactivities Behavioural changes Built environment

• Appearance of new spaces and stores
• Could reduce overall distance
(e.g. co-working spaces and telework-
Telecommuting / travelled for commuting
friendly coffeeshops)
telework • Buy may also induce additional
• Potential to allow residing or working in
non-work travel
remote areas
• Does not fully replace store
shopping • Several types of ‘brick and mortar’
stores and facilities are decreasing in
Online shopping / e- • Linked to additional shopping number (e.g. bookstores, travel
shopping activities and more shopping trips agencies and bank branches)
• May replace out-of-home leisure • People may move to remote areas
activities
• May replace travel for certain
leisure activities
• Decreasing # of e.g. music stores and
Teleleisure • May have complementary cinemas
rebound effects by saving time for
other types of travel
2. Urban Scale: Teleactivities – behavioural changes

Qin et al (2021) Housing space and ICT usage in the Netherlands

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 16

% jobs that can be done at home
2. Urban Scale: Teleactivities – spatial changes

Centralisation or Decentralisation?

Dadashpoor and Yousefi (2018)

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 20

2. Urban Scale: Teleactivities – spatial changes

• Centralisation
– Unequal distribution of developed ICT infrastructures -> central places have greater
advantange

– Increased demand for all types of interactions -> centres for various activities and
interactions

– Industrial production services are inherently face-to-face

– High-tech companies tend to agglomerate in certain locations -> clustering

• Opponents’ views
– Increased access to modern ICTs as an affordable price

– Towns/industrial districts vs entire cities

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 21

2. Urban Scale: Teleactivities – spatial changes

• Decentralisation
– Death of distance

• Opponents’ views
– Decisive factors in locating population and activities?

• Dual effects
– Telecommunications do not directly lead to (de)centralisation, but provide the opportunity to make
decisions that lead to (de)centralization

– E.g. skilled workers levels and specific locational priorities of the industry

– Inner cities vs metropolitan areas

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 22

2. Urban Scale: Metaverse

• What is metaverse?
– A hypothesized iteration of the internet

– Online spaces where user interactions are more multidimensional than current
technology supports

– Immerse in a space where the digital and physical worlds converge

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 23

2. Urban Scale: Metaverse

https://www.youtube.com/watch?v=rtLTZUaMSDQ
2. Urban Scale: Future digital world

• Metaverse = Web 3.0 + blockchain + AR/VR

• Web 3.0
– 1.0 – Pages + hyperlinks

– 2.0 – Community-based + user-generated content; ownership on domain name

– 3.0 – Own parts of the Internet (make/buy/sell)

• Blockchain
– Non-fungible token (NFT) – can be tracked in blockchain and cannot be copied/interchanged

– Individual ownership: you and your community > platform

• AR/VR
– Hologram

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 25

2. Urban Scale: Future digital world – digital goods

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 26

2. Urban Scale: Future digital world – Metaverse Seoul

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 27

2. Urban Scale: Future digital world – HKU metaverse

https://www.alumniland.hku.hk/
2. Urban Scale: Future digital world – Meta

https://www.youtube.com/watch?v=gElfIo6uw4g
2. Urban Scale: Future digital world – Meta

• What if Mark’s aspirations come true?

– Implications on human behaviours?

– Implications on urban development?

– Your two cents?

1. Global Scale
2. Urban Scale
3. Summary

URBP6002 Urban Development Theories | Dr Yang | Fall 2022 | Page 31

3. Summary

• Global scale
– Technological advancements → GVC participation

– Digital platforms → digital divide, welfare gains and regulatory challenges

• Urban scale
– Teleactivities – behavioural and spatial changes

– Web 3.0 + blockchain + AR/VR

– Dystopian nightmare?