Urbanization without Growth : A Not-So-Uncommon Phenomenon

Abstract

To find out why African countries' experience with urbanization and sustained growth appeared to differ from that of other countries, the authors investigated the determinants of urbanization across countries over 40 years. Rather than studying individuals' decisions to migrate, they relied on macroeconomic data and cross-country comparisons. A central hypothesis of their study: that individuals move (with varying degrees of ease) in response to economic incentives and opportunities. If location incentives are distorted, so is growth. The authors find that urbanization levels are closely correlated with levels of income. But urbanization continues even during periods of negative growth, carried by its own momentum, largely a function of the level of urbanization. From that viewpoint, Africa's urbanization without growth is not a puzzle. Factors other than income that help predict differences in levels of urbanization across countries include: a) income structure; b) education; c) rural-urban wage differentials; d) ethnic tensions; and e) civil disturbances. In addition, the relationship between economic incentives and urbanization is weaker in countries with fewer civil or political liberties. Factors other than initial urbanization level that help explain the speed of urbanization include: 1) The sector from which income growth is derived; 2) ethnic tensions; 3) civil disturbances and democracy (these two slow the pace of urbanization if all else is constant); 4) rural-urban wage differentials, whether they represent an urban bias or simply lower productivity in agriculture relative to other sectors. The weak relationship that this study shows between urbanization and traditionally accepted migration factors suggests that in Africa economists are overlooking part of the urbanization story. The fact that the informal sector appears to provide a significant source of income for urban migrants, coupled with the overlap between rural and urban activities, may shed light on the nature of urbanization in Africa.