What role did economics play in the growth of cities

Today, a majority of the world’s population lives in cities. By 2050, two-thirds of all people on the planet are projected to call urbanized areas their home. This trend will be most prominent in developing countries in Africa, Asia and Latin America: More than 90% of the global urban growth is taking place in these regions, adding 70 million new residents to urban areas every year.

For the many poor in developing countries, cities embody the hope for a better and more prosperous life. The inflow of poor rural residents into cities has created hubs of urban poverty. One-third of the urban population in developing countries resides in slum conditions. On the other hand, urban areas are engines of economic success. The 750 biggest cities on the planet account for 57% of today’s GDP, and this share is projected to rise further. It is thus unsurprising that rapid urban growth has been dubbed one of the biggest challenges by skeptics and one of the biggest opportunities by optimists.

One reason for this disagreement is that the relationship between economic development and urbanization is complex; causation runs in both directions. In the study “Growing through Cities in Developing Countries,”published in the World Bank Research Observer, Gilles Duranton from the University of Pennsylvania examines this relationship in depth. The strong positive correlation between the degree of urbanization of a country and its per-capita income has long been recognized. Still, the relationship between these two variables is only partially understood in the context of developing countries. In reviewing studies that focus on the impact of cities both in developed and developing countries, Duranton tries to identify the extent to which urbanization affects economic growth and development. (“Agglomeration” economies refers to physical clustering.)

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