rural urban

1. Urbanization

The process where the percentage of a population living in urban areas increases. Urbanization occurs when urban population growth exceeds rural population growth. By 2050, 7.7 billion people are expected to live in cities.

2. Rural-to-Urban Migration

The movement of people from rural areas to cities. This migration contributes to urban population growth and often leads to the development of slums due to inadequate urban planning.

3. Urban Slums and Shantytowns

Makeshift housing areas that arise when people migrate to cities without adequate infrastructure to accommodate them. Examples include the favelas in Rio de Janeiro and the bustees in Kolkata. By 2050, up to 3 billion people may live in such settlements if current trends continue.

4. Agglomeration Economies

Economic benefits that arise when firms and people cluster together in cities. Urbanization economies occur when the general growth of a city reduces costs for everyone. Localization economies occur when specific industries, like finance or manufacturing, benefit from being located near each other, creating backward and forward linkages.

5. Industrial Districts

Cities or regions where related firms cluster together, promoting learning and innovation. Spillovers from these clusters lead to greater collective efficiency. Social capital, like trust and collaboration among firms, helps these districts thrive.

6. Clusters

A theory by Michael Porter that suggests industries gain a competitive advantage by being located together in clusters. Clusters are built through social capital and government support, which encourage collaboration between firms.

7. Efficient Urban Scale

The balance between localization economies and congestion costs in a city. While industries benefit from clustering, high urban density also increases costs (e.g., real estate, vertical construction). Knowledge transfer across industries and human capital spillovers are benefits of urban density.

8. Congestion Costs

The drawbacks of high population density in cities, such as high real estate costs and the expense of building skyscrapers.

9. Backward and Forward Linkages

Economic interconnections between industries that benefit from being located near each other, where one industry’s output serves as another’s input (backward linkage) or the final product of one industry serves the next stage (forward linkage).

1. First-City Bias (7.3.1)

Definition: This refers to the phenomenon where a country's largest city receives a disproportionate share of public investment, attracting more people and economic activity than the second-largest city.
Effects: It leads to inefficiencies as the "first" city becomes overcrowded and underinvested in comparison to other urban areas.

2. Urban Giantism and the Political Economy (7.3.2)

Urban Giantism: The excessive growth of the largest city (first city) in developing countries due to factors like political centralization and transportation networks.
Reasons: Hub-and-spoke transportation systems, the location of political capitals in the largest cities, and rent-seeking behavior by governments (gaining economic benefits without contributing to productivity).
Krugman’s Theory: Under import substitution (high protectionist trade policies), firms concentrate in one city to reduce transport costs. But when trade barriers are reduced, economic activities shift to more efficient locations (e.g., ports, borders).

3. Urban Informal Sector (7.4)

Definition: This sector includes unregulated, small-scale activities that provide employment in urban areas. Workers are often unskilled and self-employed with no job security.
Characteristics:
- Small family-owned businesses.
- Use of simple, labor-intensive technology.
- Lower productivity and wages compared to the formal sector.
- Informal workers lack protection like pensions and decent working conditions.
Relationship to Other Sectors:
- Connected to rural areas by offering an escape from rural poverty.
- Dependent on the growth of the formal sector for clientele.

4. Women in the Informal Sector (7.4.2)

Trends: Women are increasingly migrating from rural to urban areas in search of economic opportunities.
Challenges: In many developing countries, the formal sector is dominated by men, so most women find themselves working in the informal sector.

5. Migration and Development (7.5)

Rural–Urban Migration: Migration from rural to urban areas exacerbates structural imbalances.
- Supply Side: More job seekers in urban areas deplete rural areas of skilled labor.
- Demand Side: Urban job creation is harder and more expensive, leading to a surplus of urban labor.
Patterns of Migration: While rural–urban migration is dominant, other patterns like urban-to-urban or urban-to-rural migration also exist, especially during economic downturns or when rural crop prices rise.
Development Impact: Rural–urban migration supports the growth of cities and their economies but creates challenges due to lagging job creation.

7.6 Toward an Economic Theory of Rural–Urban Migration

Economic development in western Europe and the United States was closely linked to rural–urban migration, where labor shifted from agriculture to industry. This model was initially thought to apply to developing countries, but the phenomenon of mass rural–urban migration despite high urban unemployment in recent decades challenged the traditional Lewis two-sector model. Instead, the Todaro migration model explains this paradox.

7.6.1 Todaro Model Description

The Todaro model assumes that migration is primarily driven by economic considerations. Migrants weigh expected income (rather than actual earnings) between rural and urban sectors, and migration occurs when expected gains outweigh the risks, despite potential urban unemployment.

7.6.2 Diagrammatic Presentation

The Harris-Todaro model portrays migration as a balance between urban expected wages and rural income rather than equalizing rural–urban wages. Factors such as imperfect information and market responses influence wage discrepancies and unemployment in the urban sector.

Key Features of the Todaro Migration Model:

Migration is motivated by economic factors, including financial and psychological benefits.
The decision to migrate depends on expected urban–rural wage differentials, not actual earnings.
The likelihood of finding urban employment depends on the urban employment rate, which is inversely related to the unemployment rate.
Migration rates can surpass urban job growth, leading to high urban unemployment.

7.6.3 Policy Implications

If migration is rational but risky, policymakers need to address market and government failures. Rapid urbanization strains infrastructure and creates negative externalities, while rural areas lose skilled workers. Solutions involve reducing urban bias and investing in rural development to mitigate push-and-pull migration factors. Key points include:

Balancing rural and urban economic opportunities is crucial for managing unemployment and reducing excessive migration.
Urban job creation alone does not solve unemployment; it may increase migration and reduce agricultural output.
Educational expansion can exacerbate migration and unemployment.
Wage subsidies or government hiring may induce more migration, worsening unemployment.

7.7 Comprehensive Strategy for Urbanization, Migration, and Employment

As developing countries’ cities are expected to grow, strategies must focus on creating rural–urban balance and improving infrastructure. Essential measures include:

Rural development to create nonfarm employment opportunities.
Expansion of small-scale, labor-intensive industries to generate jobs.
Correcting factor price distortions (such as eliminating capital subsidies) to increase job creation.
Developing labor-intensive technologies suited for both rural and urban sectors.
Reforming the education-to-employment linkage to address the problem of educated unemployment.
Reducing population growth through poverty alleviation, particularly for women.
Decentralizing authority to cities and neighborhoods for better urban management.
Leveraging urban dynamism for economic growth while addressing migration implications.
Addressing urban poverty, especially in slum conditions.
Planning for climate migrants with a focus on sustainable rural development and climate adaptation.