Welfare Impacts of Urbanization and
Growth in South Asia: Perspective from
New Economic Geography
Muhammad Zeshan, Dr. Vaq...
Outline
•
•
•
•
•
•
•
•

Introduction
Urbanization, Poverty and Inequality in South Asia
The New Economic Geography
Gains ...
Introduction
• Urban areas are now hubs of production activities
• Urban Population of South Asia will increase to
around ...
Projection of Urban
1000000
900000
800000
700000
600000
500000

Year 2010
Year 2050

400000
300000
200000
100000
0
Afghani...
Growth Rate of Urbanization
1.4
1.2
1
0.8
0.6
0.4

0.2
0

South Asia

European Union

High income: OECD

Latin America & C...
GDP Growth Rate
12

10

8

6

4

2

0
198119821983198419851986198719881989199019911992199319941995199619971998199920002001...
Urbanization, Poverty and Inequality in
South Asia
India

Bangladesh
90
80
70
60
50
40
30
20
10
0

100
80
60
40
20
0

Urba...
Urbanization, Poverty and Inequality in
South Asia
Nepal
Sri Lanka

100
60
90
80

50

70
40

60
50

30

40
30

20

20
10

...
Urbanization, Poverty and Inequality in
South Asia
Countries

Bangladesh

Time

India

Nepal

Pakistan

Sri Lanka

Urbaniz...
New Economic Geography
• The externalities emerging from demand and
supply spillovers also increase market
interaction and...
Gains from Trade
• A key role of Trade is contribution to Economic
Growth
• Trade induced urban migration has important
im...
Is Urbanization Inclusive?
• New Opportunities for the Poor rural workers
• Impact of urbanization on poverty reduction
• ...
Theoretical Framework
We formalize the framework as follows:
rit = f(g it, y it, s it, u it), (1)
pit = f(g it, y it, s it...
Econometric Model
Seemingly Unrelated Regression equations (SURE)
framework to estimate the impact of urbanization,
region...
Results- Impact on Poverty
Seemingly unrelated regression
Dependent Variable: Poverty rate (USD 2 per day)
Bangladesh

Ind...
Results-Impact on Inequality
Variables

Afghanistan

Bangladesh

Bhutan

India

Nepal

Maldives

Pakistan

Sri Lanka

Urba...
Fix Effects Model

Dependent Variable: Poverty
Variables

South Asia

Urbanization

-1.264***

Regional Trade

-0.189***

...
Fixed Effects Model

Dependent Variable: Inequality
Variables

South Asia

Urbanization

-0.0001

Regional Trade

0.00002
...
Recommendations
• Impact of trade liberalization on poverty is
smaller, it is essential to revisit the trade policies
acro...
Thank You

www.sdpi.org www.sdpi.tv
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Welfare Impact of Urbanization and Growth in South Asia

  1. 1. Welfare Impacts of Urbanization and Growth in South Asia: Perspective from New Economic Geography Muhammad Zeshan, Dr. Vaqar Ahmed and Muhammad Sohaib 24-02-2013 Center for Jawaharlal Nehru Studies Jamia Millia Islamia (Central University)
  2. 2. Outline • • • • • • • • Introduction Urbanization, Poverty and Inequality in South Asia The New Economic Geography Gains from Trade Inclusive Urbanization Econometric Model Findings Recommendations
  3. 3. Introduction • Urban areas are now hubs of production activities • Urban Population of South Asia will increase to around 1188 million by 2050 (World Urbanization Prospects 2011) • Urban inclusion is helped in these ingredients o Open markets o Provision of public goods and services o Strengthening mechanism of Voice and accountability
  4. 4. Projection of Urban 1000000 900000 800000 700000 600000 500000 Year 2010 Year 2050 400000 300000 200000 100000 0 Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka
  5. 5. Growth Rate of Urbanization 1.4 1.2 1 0.8 0.6 0.4 0.2 0 South Asia European Union High income: OECD Latin America & Caribbean (all income levels) North America OECD members World Source: World Development Indicators
  6. 6. GDP Growth Rate 12 10 8 6 4 2 0 19811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012 -2 -4 -6 South Asia European Union High income: OECD Latin America & Caribbean (all income levels) North America OECD members World Source: World Development Indicator
  7. 7. Urbanization, Poverty and Inequality in South Asia India Bangladesh 90 80 70 60 50 40 30 20 10 0 100 80 60 40 20 0 Urbanization Poverty Inequality Urbanization Poverty Inequality Pakistan 100 80 60 40 20 0 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012 Urbanization Poverty Inequality Source: World Development Indicators
  8. 8. Urbanization, Poverty and Inequality in South Asia Nepal Sri Lanka 100 60 90 80 50 70 40 60 50 30 40 30 20 20 10 10 0 0 19851987198919911993199519971999200120032005200720092011 Urbanization Poverty Inequality Urbanization Poverty Inequality
  9. 9. Urbanization, Poverty and Inequality in South Asia Countries Bangladesh Time India Nepal Pakistan Sri Lanka Urbanization (measured by Urban Population/Total Pupulation) 1980s 18.7 24.9 8.1 30.0 17.6 1990s 21.9 26.7 11.2 32.0 16.4 2000s 26.4 29.8 15.6 34.9 15.2 Poverty (measured by USD 2 a day) 1980s 89.4 83.5 92.6 88.8 50.8 1990s 87.8 80.7 87.9 81.0 46.3 2000s 79.6 73.6 68.2 63.7 31.4 Inequality (measured by Coefficient of Variation, population weighted) 1980s 29.4 82.9 12.2 29.3 11.6 1990s 29.3 81.8 12.4 29.5 10.6 2000s 28.4 73.7 12.1 28.3 8.4 Source: World Development Indicator During 2000, poverty in Pakistan reduced more than India
  10. 10. New Economic Geography • The externalities emerging from demand and supply spillovers also increase market interaction and reduces the transportation cost • The new economic geography discusses economic activity based on location, increasing returns, monopolistic competition, and transaction costs
  11. 11. Gains from Trade • A key role of Trade is contribution to Economic Growth • Trade induced urban migration has important implications for poverty and income distribution • Trade activities in urban areas provide new opportunities to the migrant labor and also equalize the wage rate across different regions.
  12. 12. Is Urbanization Inclusive? • New Opportunities for the Poor rural workers • Impact of urbanization on poverty reduction • The clustering of urban population in a few places can promote economies of scale which may reduce poverty (World Bank, 2009) • The urban migration includes a significant share of the rural poor, which reduces the overall poverty and inequality (Ravallion et al., 2007).
  13. 13. Theoretical Framework We formalize the framework as follows: rit = f(g it, y it, s it, u it), (1) pit = f(g it, y it, s it, u it), (2) i = 1, …, N (South Asian Countries) t = 1, …, T (Time) r:Measur of inequality p: Poverty rate g: Growth rate of GDP y: GDP per capita s: Trade integration u: Urbanization
  14. 14. Econometric Model Seemingly Unrelated Regression equations (SURE) framework to estimate the impact of urbanization, regional trade and economic growth on poverty and inequality ; (i = 1, 2, …, 8)
  15. 15. Results- Impact on Poverty Seemingly unrelated regression Dependent Variable: Poverty rate (USD 2 per day) Bangladesh India Nepal Pakistan Sri Lanka Urbanization -1.198 *** -1.642 *** -1.783 *** -4.715 *** 4.441 *** Regional Trade -0.043 0.899 -0.123 *** -1.41 *** -0.509 *** GDP per capita -0.003 -0.002 *** -0.014 *** 0.018 *** -0.002 *** GDP growth rate -0.065 -0.007 -0.014 -0.104 0.004 Constant 114.7 *** 124.0 *** 117.5 *** 232.1 *** -19.0 *** R-sq 0.86 0.97 0.97 0.93 0.99 P-value 0.00 0.00 0.00 0.00 0.00 ***, ** and * indicate 1%, 5%, and 10% level of significance respectively.
  16. 16. Results-Impact on Inequality Variables Afghanistan Bangladesh Bhutan India Nepal Maldives Pakistan Sri Lanka Urbanization -0.0003 0.0008 *** -0.0001 *** -0.003 *** 0.0005 *** 0.0001 *** 0.004 *** 0.003 *** Regional Trade 0.0004 *** -0.0002 *** -0.000002 *** -0.004 ** 0.000005 -0.000003 *** -0.0004 *** 0.00003 ** GDP per capita -0.0001 *** -0.00006 *** -0.000001 *** -0.0001 *** -0.00002 *** -0.000002 *** -0.00005 *** -0.00001 *** GDP growth rate 0.0003 *** 0.00001 ** -0.000007 * -0.00002 0.000004 -0.000001 -0.000008 0.000004 Constant 0.123 *** 0.023 *** 0.965 *** 0.122 *** 0.01 *** 0.004 *** 0.064 *** 0.296 *** R-sq 0.87 0.99 0.98 0.99 0.97 0.99 0.99 0.99 P-value 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
  17. 17. Fix Effects Model Dependent Variable: Poverty Variables South Asia Urbanization -1.264*** Regional Trade -0.189*** GDP per capita -0.01*** GDP growth rate -0.068 Constant 111.9 F-stat 254 ***, ** and * indicate 1%, 5% and 10% level of significance.
  18. 18. Fixed Effects Model Dependent Variable: Inequality Variables South Asia Urbanization -0.0001 Regional Trade 0.00002 GDP per capita -0.000008*** GDP growth rate -0.0002** Constant 0.225*** F-stat 3112 ***, ** and * indicate 1%, 5% and 10% level of significance.
  19. 19. Recommendations • Impact of trade liberalization on poverty is smaller, it is essential to revisit the trade policies across South Asia. • Attention should be paid towards strengthening mechanism of community voices and gender empowerment. • There is need to revisit tariff and non-tariff barriers in South Asia • It is important to have in place commerce and environmental friendly urban zoning and building regulations.
  20. 20. Thank You www.sdpi.org www.sdpi.tv

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