Urbanization and

Development
Prepared by
Ataul Gani Osmani
Lecturer, Dept. of Economics, Varendra University
 Is there any relationship between urbanization and
economic development?
 Urbanization occurs as countries switch sectoral composition

 Agricultural composition transforms to industrial

composition

 Technological advances in domestic agriculture release

labor from agriculture to migrate to cities
Urbanization, or the shift of population from rural to
urban environments

 It is a transitory process, albeit one that is socially

and culturally traumatic.

 We often think of cities as major drivers of

economic development and growth.
 Because
 Big cities expand our access to infrastructure like public
transit and public education.

 They allow for more efficient distribution of social services

such as government assistance and health care.

 Cities create large markets for business, and can attract

international investment and tourism from around the
world.
 They are hubs of non-agricultural, high-paying
professional jobs like banking, law, and engineering.

 Diversity and face-to-face interactions can lead to

new ideas and cross-cultural collaborations.

 Therefore, conventional wisdom holds that cities are

good for the economy.
Cities exercise enormous control over national
economies, they provide
 Why do economic growth and development
both a cause and consequence of urbanization?
 The world is getting urbanized

 the more developed the country, measured by

per capita income, the greater the share of
population living in urban areas
 Moreover, on average developing countries are
urbanizing at a faster rate.
Cities are engines of growth
 The transition from a poor economy to a rich one depends
on the transition of the majority of the population from
being rural to urban.

“manufacture” wealth
This creation of wealth is a consequence of the
urbanization since urbanization makes manufacturing
possible.
Manufacturing has “scale economies”
Transaction costs
Infrastructure

Infrastructure has “scale economies”

 the larger the amount of infrastructure, the

lower the cost per unit of infrastructure.
 Thus the high aggregate demand for infrastructure in
urban areas allows sufficiently large supplies at lower
average costs.

 Lower costs translate into more efficient services and

therefore the advantage that cities have over rural areas
in conducting business.
The Scale of Urban Services & Infrastructures
Urban services and Infrastructures’ can be considered the
conjunction of intestines and essential organs of a city.
To achieve a shift towards more sustainable systems, urban
professionals, designers and decision makers often aim
immediately to implement new systems, based on
renewables.
 To achieve sustainable development of essential streams and
related infrastructures, there is a preferred order in approach.
The right order, known as the ‘Trias Ecologica’, or ‘Trias
Energetica’

Step 1 Step 2 Step 3

Reduce Recycle Renewable

(Energy) (available) (energy)
demand surplus generation
 1 Reduce 2 Reuse 3 Renewable 4 Clean (er)
demand Residual generation Conventional
effluents
Energy via central
City (region) Connection to central
grid, clean &
energy grids with
excess energy efficient
(conventional, non-
renewable
City District Exchange & leveling Renewable energy generation)
or cascading of generation on
energy on district district level
level

Neighbourhoo Exchange & leveling or Renewable energy

d/ (building) cascading of energy on generation on
Cluster neighbourhood level district level
Energy at building
level, clean &
Building Avoid energy
Reuse of excess
Renewable energy efficient
demand by generation on (conventional, non-
measures at energy on building renewable
building level
building scale level generation)
Urban bias
 
 The notion that most governments in
developing countries favor the urban sector in
their development policies, thereby creating a
widening gap between the urban and rural
economies
Rural-urban migration
 The movement of people from rural villages to towns,
and Agri-farms to urban centers (cities) in search of
jobs.
 Todaro migration model
 
A theory that explains rural-urban migration as an
economically rational process despite high urban
unemployment. Migrants calculate (present value of)
urban expected income (or its equivalent) and move if
this exceeds average rural income.
The Todaro model (by Michael Todaro)

Economic costs and benefits determine individual

decision to migrate. He argues potential migrants
are willing to endure short-term falls in income
in the hope of better prospects for themselves
and their children in the future.
Harris-Todaro model
 
An equilibrium version of the Todaro migration
model that predicts that expected incomes will
be equated across rural and urban sectors when
taking into account informal-sector activities
and outright unemployment.
Requisites of Urbanization for Economic
Development?
 National urban policies

 Establishing rules and regulations

 Urban planning and design

 Form a financial plan

 Local implementation
 How to design a socially
sustainable living environment?
A sustainable urban environment
facilitates the primary needs for ALL
individuals.

how do we create a socially sustainable

living environment?
Inhabitants perceive a safe and healthy
environment, are in control and facilitate
the desired level of social interaction.