Eae 305

KENYATTA UNIVERSITY
SCHOOL: SCHOOL OF ECONOMICS
DEPARTMENT OF APPLIED ECONOMICS
EAE 305: URBAN ECONOMICS
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WRITTEN BY: DR. JAMES MAINGI
Copyright© Kenyatta University 2011
All rights reserved
Published By:
KENYATTA UNIVERSITY PRESS
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Table of contents
Lesson 1: Urban Economics………………………………………………………………5
Introduction………………………………………………………………………………..5
What Urban Economics is all about?...................................................................................6
Summary…………………………………………………………………………………..7
Further reading…………………………………………………………………………….7
Lesson 2: Analytical Concept of Centers and Regions……………………………………8
Introduction………………………………………………………………………………..8
Objectives…………………………………………………………………………………8
Central place theory……………………………………………………………………...10
Growth pole theory………………………………………………………………………12
Summary…………………………………………………………………………………12
Further Reading………………………………………………………………………….13
Lesson 3: The Economic Basis for the Establishment of Urban Center…………………14
Introduction………………………………………………………………………………14
Objectives………………………………………………………………………………..14
Urban problems and economic theory…………………………………………………...15
Growth of Urban Population……………………………………………………………..16
Urban unemployment and the growth of the informal sector……………………………18
Summary…………………………………………………………………………………22
Further Reading………………………………………………………………………….23
Lesson 4: Factors that Determine the Location of Industries……………………………24
Introduction………………………………………………………………………………24
Objectives………………………………………………………………………………..24
Location problems……………………………………………………………………….25
Summary…………………………………………………………………………………30
Further Reading………………………………………………………………………….31
Lesson 5: Urban Decay and Renewal……………………………………………………32
Introduction………………………………………………………………………………32
Objectives………………………………………………………………………………..32
Strategies for urban decay………………………………………………………………..36
Summary…………………………………………………………………………………38
Further Reading………………………………………………………………………….40
Lesson 6: The role of Municipal Council………………………………………………..39
Introduction………………………………………………………………………………39
Objectives………………………………………………………………………………..39
Municipal education and housing stock………………………………………………….43
Financing of urban economies…………………………………………………………...44
Summary…………………………………………………………………………………45
Further Reading………………………………………………………………………….46
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Lesson 7: Major Problems and Subjects of Research and Analysis in Urban
Economics………………………………………………………………………………47
Introduction………………………………………………………………………………47
Objectives………………………………………………………………………………..47
Rural urban migration……………………………………………………………………48
Migrant Characteristics…………………………………………………………………..49
Summary…………………………………………………………………………………54
Further Reading………………………………………………………………………….55
Lesson 8: Urban Land Use……………………………………………………………….56
Introduction………………………………………………………………………………56
Objectives………………………………………………………………………………..56
Importance of urban areas………………………………………………………………..56
Inequalities resulting from the ownership of land concentration………………………...58
Summary…………………………………………………………………………………59
Further Reading…………………………………………………………………………59
Lesson 9: Economic Externalities of Urban Concentration……………………………...60
Introduction………………………………………………………………………………60
Objectives………………………………………………………………………………..60
Positive externalities of urban Economics……………………………………………….62
Summary…………………………………………………………………………………65
Further Reading………………………………………………………………………….65
Lesson 10: The Basis of Planning in Urban Areas………………………………………66
Introduction………………………………………………………………………………66
Objectives………………………………………………………………………………..66
What planning is and why do we have to plan urban planning………………………….66
The essential characteristics of a good plan……………………………………………...69
Summary…………………………………………………………………………………70
Further Reading………………………………………………………………………….71
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LESSON 1
URBAN ECONOMICS
1.0 INTRODUCTION
Presently an increasing proportion of the rapidly growing world population is attempting
to satisfy its economic and social needs and desires in urban context.
The enormous migration of people into cities has produced a very distinct possibility of
an uncontrollable urban explosion.
i) An unprecedented increase in population.
ii) Greater demands on the urban infrastructure
iii) Higher rates of population growth
iv) A decrease in the non-material and in some cases material standards of life.
Given this trend, urban economics addresses itself to issues like:-
i) How prices influence where people live
ii) How prices influence where people work
iii) How firms decide where to locate their business in cities and
iv) Why we have to plan urban centers
Thus urban economics deals with the application of economic theory to such issues
facing urban areas of the world.
It addresses itself and recognizes that as changes occur there will be important
consequences for individuals and for communities.
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Before we discuss what urban economics deals with, it is important to define the term
urban.
The first thing that we are concerned with is knowing whether an area is urban or not is
population. It is used as a criterion and varies from country to country, for example for a
place to be called an urban centre in Scandinavia anyplace place with 200 and above
people qualifies.
CANADA 1,000 people and above
U.S.A 2,500 people and above
KENYA 2,000 people and above
GREECE 10,000 people and above
JAPAN 30,000 people and above
The other criterion is the economic function. This includes mainly the non-agricultural
function of the area. The centre has to have a high proportion of the population engaged
in non agricultural activities.
What Urban Economics is All About
Presently an increasing proportion of the rapidly growing world population is attempting
to satisfy its economic and social needs and desires in an urban context. The enormous
migration of people into cities has produced a very distinct possibility of an
uncontrollable urban explosion and an unprecedented increase in population, greater
demands on the urban infrastructure higher rates of population, and a decrease in the non-
material and in some cases materials standard of life. Given this trend urban economics
addresses itself to issue like why cities exist and what makes them grow or decline. How
prices influence where people live or work in cities, the problems that cities face. How
firms decide where to locate their businesses in cities and why we have to plan urban
centers. Thus urban economics deals with the application of economics theory to such
issues facing urban areas of the world. It addresses itself to these issues and recognizes
that as changes occur there will be important consequences for individuals and for
communities.
Some of the issues mentioned above are primarily micro economic involving the
preferences, decisions and experiences of such units as households or individuals
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business firms. Others involve the behavior of large groups of people or even whole
industries and sometimes governments. The business firm for example is most interested
in choosing a profitable location in relation to given markets, sources of materials, labour
and other relevant location factors. All these arise because of the fundamental behavior
of economic resources. This is what resources are limited in relation to human wants so
that if they are used for one purpose they cannot be used for another
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SUMMARY
This lesson has introduced you to the meaning of the term urban. It has pointed out
that population is the major criterion in deciding whether an area is urban or not.
This however varies from country to country. The economic function of the area is
also important in that for a centre to be called urban a high proportion of the
population must be engage in non-agricultural activities.
The lesson has also discussed what urban economics deals with. It has pointed out
that urban areas face several challenges. These are challenges emanating from urban
growth and decline, urban problems such as population, transport, housing etc. All
these require attention and solutions, urban economics using theory therefore
addresses itself to these issues and how a solution to urban problems could be
reached.
FURTHER READING
Hoover, E.M. and Giarratani, F. An Introduction to Regional Economics Third
Edition, Alfred A. Knoff, New York, 1984
Balchin, P.N. and Kieve J. L. Urban Land Economics, Third Edition, Macmillan,
1985

LESSON 2
ANALYTICAL CONCEPTS OF CENTRES AND REGIONS INCLUDING
THEORIES OF CENTRAL PLACES, MODES AND GROWTH POLES
2.0 INTRODUCTION
2.2 The concept of the Region
The first step in the concept of the region is to examine whether regions are natural
phenomena or merely mental constructions. There are two divergent view-one objective,
the other subjective. The subjective view sees a region as a means to an end, simply an
idea, a model, co help in the study of the world. It is a method of classification, a device
to segregate aerial features.
The objective view adopts an opposite stance, seeing the region as an end in itself, a real
entity that can be identified and mapped. The subjective view is now generally accepted.
Regions are seen as descriptive tools, defined according to particular criteria, for
particular purposes. In this context they perform a particularly useful function, avoiding
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2.1 LESSON OBJECTIVES
At the end of this lesson you should be able to:-
1. Explain what a region is, and the different types of regions.
2. Describe what the central place theory deals with and its relevance for regional
planning.

the extremes of description. Without the regional concept for example, a description or
say Britain would either be so general as to be meaningless- An Industrial nation, with a
cool climate whose capital is London-or so complex as to be incomprehensible,
cataloguing every single feature of the local landscape.
The concept of the region as a method of classification has evolved through two distinct
phase reflecting the economic advance from a simple aggrerian economy to a complex
industrial system. The first phase saw the ‘formal region’ concerned with uniformity and
defined according to homogeneity. The second phase saw the development of the
‘functional region’ concerned with interdependence, the interrelationship of the parts, and
defined on the basis of functional coherence.
A formal region is an geographical area which is uniform or homogeneous in terms of
selected criteria. In early definitions of formal regions, the criteria were predominantly
physical such as topography, climate or vegetation. Later there was a shift to the use of
economic criteria such as industrial or agricultural types. Economic formal regions are
generally based on types of industry or agriculture such as the south Yorkshire coal
mining region or the Cotswold’s sheep farming region although there are obvious
physical undertones. More recent attempts to delimit economic formal regions have been
based on criteria such as income level, rate of unemployment and rate of economic
growth.
A functional region is geographical area which displays a certain functional coherence,
an interdependence of parts, when defined on the basis of certain criteria. It is sometimes
referred to as a nodal or polarized region and is composed of heterogeneous units such as
cities, towns and villages which are functionally interrelated.
The functional relationships are usually revealed in the form of flows, using socio-
economic criteria such as journey to work trips or shopping trips linking the employment
or shopping centre with subsidiary centres.
Formal or functional regions or a combination of both may provide a useful framework
for a third type of regional classification into planning regions.
Planning regions are areas displaying some coherence or unity of economic decisions. It
is an area which is large enough to enable substantial changes in distribution of
population and employment to take place within its boundaries yet which is small enough
for its planning problem to be seen as a whole.
Amongst other things, a planning region must be large enough to take investment
decisions of an economic size, must be to supply its own industry with the necessary
labour, should have a homogenous economic structure, contain at least one growth point
and have a common approach to and awareness of its problems. Such definitions suggest
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that planning regions use geographical criteria suitable for the designing and
implementing of development plans for dealing with problems affecting it.
2.3 CENTRAL PLACE THEORY
The notion of central place theory is linked with the name of Walter Christalle and his
pioneering work on central place of southern Germany. From voluminous literature on
the subject, certain basis concepts can be abstracted. These are concepts such as Service,
activities, Hierarchy, Threshold and Range.
Service activities can be classified to a variety of different ways. They can be classified
into four homogenous trade groups on the basis of functional qualities.
They include
a) Repair work and other services carried out directly on physical objects.
b) Distribution and transportation of goods.
c) Processing and distribution of information including organization, administration
and education,
d) Attendance to various personal and collecting needs such as security and health.
Within these groups, activities may vary greatly in scale. Thus postal services may vary
from a rural Post Box to a General Post - Office, retail trades may vary from a small
corner shop to a large departmental store. In other words, there is a hierarchy of service
activities, ranging from “low order,” services found in every centre, city, town or village
to “high order” services found only in the major centres. Thus major towns and cities are
likely to have most services, with smaller towns and villages having a more limited
number. Each service activity has a threshold population and market range.
The threshold population is the minimum population necessary to support the service
activity. It may be as low as 250 people for a corner shop or as high as 150,000 for a
theatre. If the population falls below the threshold level, the activity will run at a loss and
will face closure in the long run. If the population increases above the minimum, the
activity will run at a loss and will face closure in the long run. If the population increases
above the minimum, the activity will increase its profits which may also lead to increased
competition though increased provision of service activities.
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The market range of a service activity is that distance which people are willing to travel
to reach the service. It is the outer limit or the market area for the service activity beyond
which people will look to another centre. For example people may be willing to travel to
the nearest large town for jewellery and good clothing but only to the local corner shop
for sweets and tobacco.
CENTRAL PLACE THEORY AND REGIONAL PLANNING
I would like to start this section by asking the following questions.
It would seem to have two potential roles:-
First as a framework for understanding the regional spatial structure and secondly as a
model for future planning.
There is little doubt that central place theory does provide a very valuable partial
framework for the understanding of regional structure but what of its role for future
planning?
A basic argument supporting the use of central places in regional planning is that a
hierarchical system of centres avoid duplication and waste.
It is a relatively efficient way of administering and allocating resources within a region,
facilitating the realization of social benefits accruing from economies of scale.
In addition, the network of interrelated centres means that the planning of any centre
within an area must take into account the implications for other centres within the area.
The lack of recognition of this principle has led to much wasteful duplication of shopping
facilities in certain areas of the country. Also a region’s economic shock resistance is
much greater where the regions spatial structure is closely knit.
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Does central theory have any relevance for regional planning?

2.4 GROWTH POLE THEORY
Growth does not appear everywhere and all at once; it appears in points of development
poles with variable intensities; it spreads along diverse channels and with varying
terminal effects to the whole of the economy. More specifically, Boudeville defines a
regional growth pole as a set of expanding industries located in an urban area and
inducing further developing of economic activity through its zone of influence.
The theory has been adapted not only for understanding regional structure, but also as a
method for predicting changes in that structure and describing solutions to certain
regional problems.
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2.5 SUMMARY
This lesson has introduced you to certain basic concepts that you will find useful
in understanding other lessons of this unit.
As outlined earlier, subjective and objective views can be taken of the concept of
the region. The subjective view regards regions as descriptive tools, defined
according to particular criteria for particular purposes

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On this basis, formal and functional regions can be identified. Such regions may
provide the basis for ideal planning regions. This can be done through the
identification of an economic planning region on the basis of homogeneity in a
certain criteria such as unemployment.
This lesson also introduced you to central place theory and its relevance for
regional planning. It was mentioned that this theory is useful in that it provides a
framework for understanding the regional spatial structure and also serves as a
model for future planning.
The lesson also discussed growth pole theory. It was pointed out that this theory
can assist us in understanding regional structure. Apart from the theory also
serves as a method for predicting changes in that structure and prescribing
solution to certain regional problems.
2.6 FURTHER READING
Glasson, J., An introduction to Regional Planning, Second Edition, Hutchnson,
London, 1978.
Christaller, W., Central Places in Southern Germany, Engleweood Cliffs, New
Jersey, 1996
Boudeville, J., Problems of Regional Economic Planning, Edinburgh University
Press, 1966.

LESSON 3
THE ECONOMIC BASIS FOR THE ESTABLISHMENT OF URBAN CENTRES
3.0 INTRODUCTION
Urban centres have various functions to perform. In this lesson we shall first present
arguments for the establishment of urban areas. We shall also discuss the problems that
urban areas face as they grow.
When you read about an urban centre, you come across issues such as traffic congestion,
pollution, high property taxes, crime and so on. The questions I want you to think about
before you proceed with this lesson are:
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By the end of this lesson, you should be able to:
Explain the functions of cities;
ACTIVITY 1
Why should we have urban centres at all?
Why doesn’t each one of us live in a remote country cottage far away from
everyone else?

The fact that urban centres exist means that there must be something right with them.
They provide jobs, god shopping areas, and a variety of cultural activities.
There are also economies of scale involved in making goods in urban centres. Some
types of activities favour a highly clustered pattern, in which certain external economies
of agglomeration can be secured. Thus if we define and urban place as a spatial
concentration involving a variety of activities, we can already see some good economic
reasons for the existence of such concentrations. Thus, such concentrated urban activities
are subject to internal or external or both. Thus people engaged in each of these activities
require the output of other activities and it is economical to have these activities near
each other. So large factories found in such areas produce their commodities more
cheaply than a self sufficient individual in a remote setting. Also when activities are
located near each other it will be easier for people to trade exchange goods and services
with one another.
This means that we would face enormous costs if we live and locate our activities in
remote settings. We would have to spend large amounts of time and money looking for
other people to trade with.
URBAN PROBLEMS AND ECONOMIC THEORY
In order to appreciate the nature of the urban crisis currently confronting all categories of
underdeveloped countries, it is useful to indicate what implications should stem from the
urbanization of a country. Urbanization should entail the following for the people of a
country. It should lead to a situation where men should be able to live in dignity and
security and harmony, where the great achievements of modern civilization and the
ageless pleasures afforded by natural beauty should be available to all. So the city is not
just housing and stores. It is not just education and employment parks and threatres,
banks and shops. Any one who has visited cities and towns in most underdeveloped
countries must come away with the overwhelming impression that whatever validity the
above observation has in the developed countries, it does not describe the reality of
conditions in underdeveloped countries, it does not describe the reality of conditions in
underdeveloped countries. A significant proportion of urban residents in most
underdeveloped countries cannot be said to live in dignity, security and harmony. The
national resources represented by urban services and opportunities for employment are
not available to all. The sharp social and economic inequalities that characterize life in
the urban centres of undeveloped countries would not necessarily have given rise to a
crisis situation if their magnitude were determinable and the tendencies kept within
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manageable proportions. But it is precisely the intense dynamism of these conditions
which is fuelling the crisis and making it difficult to achieve a realistic solution. It is
rather the product of urban economic activities growing at a rate not fast enough to
provide employment opportunities for the rapidly increasing population of these cities.
Among the problems currently facing urban areas include:-
 Increasing in population
 Urban unemployment
 Greater demands on urban infrastructures
 Higher rates of pollution and other environment problems of cities.
Growth of Urban Population
An increasing proportion of the rapidly growing world population is currently attempting
to satisfy its economic and social needs in an urban context. This coupled with the
enormous migration of people into cities has produced a very distinct possibility of an
uncontrollable urban problem.
Two facts are generally conceded in discussing urbanization in underdeveloped countries.
The first is the rapid rate of growth of the urban population particularly in the period just
after the second world war; the second is the concentrating of much of this population in
large cities of at least 100,000 people. Between 1920 and 1970, the proportion of the
population of underdeveloped countries living in cities of at least 20,000 people rose
from under 7% to nearly 20%. This varied from 4.8 to 16.0% for Africa and 14.4 to
37.8% for Latin America. The present prognosis is for a still faster rate of growth by the
beginning of new turn of the century. This remarkable upsurge in the size of combination
of a relatively high rate of natural increase and a significant reduction in death rates due
to improved medical and sanitation conditions at a time when the birth rate remained
quite high. Equally significant is the fact that in underdeveloped countries no
fundamental change in reproductive behavior accompanied the reduction in mortality.
The result was that with death rates around sixteen per thousand and birth rate still above
thirty five per thousand in many of these countries, the excess kept the population
growing at a steadily increasing rate.
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There has however been some disagreement as to the relative contribution of natural
increases and rural-urban migration to total urban growth rates in underdeveloped
countries. But irrespective of the issue of relative value, there is no doubt that with the
rapid rate of population growth in most underdeveloped countries the absolute size of the
contribution of migration to urban growth is enormous. The reasons for this recent spate
of migration reflect the dominance of push factors out of the rural areas as well as
significant pull factors from the urban areas themselves.
Upto the 1950s average annual urban growth rate in most of these countries was of the
order of 4.5 percent since then, this has risen sharply to between 5.5 and 8.0 percent.
Such high rates would mean that most cities would more than double their population in
the short time span of between ten to fifteen years. For example, among the world’s
developing countries Kenya’s population is known to be increasing rapidly. This is
particularly true of the urban population which ahs been increasing primarily as a result
of accelerating rural-urban drift as well as the natural rate of increase. This important
change in the urban population is a result of the general population change which is
expected to bring the total population of the country to about 33 million in 1989.
In the last two decades, the urban population of Kenya has been growing within the range
of 6.5 to 8.5 per cent per annum. Kenya is however not highly urbanized like most other
less developed countries. This combination of low levels of urbanization and high rates
of urban population growth make the formulation and implementation of sound national
urban policies very critical. But the policy design will be made complicated by high rates
of rural-urban migration. This influx of large numbers of people into Kenya urban centres
will put an added strain on basic services and facilities. At the same time, it will also
stagnate the development of the rural areas because the young and the educated will also
join the rural-urban migration exodus.
A major factor in the configuration of the problems arising from rapid urbanization is the
resultant age – sex distribution in the urban population. The recent upsurge in the growth
of these cities means that a high proportion of their population is young. This is further
emphasized by the selectivity of the rural-urban migration process in favour of the youth.
Hence one of the most striking characteristics of urban centres in underdeveloped
countries is the high proportion of the population in the age class fifteen to thirty five
years old. In many of the countries this age selectivity goes hand in hand with a sex
imbalance in which there is a disproportionate number of males in the population. This is
more so in the case of African and Asian Cities than in Latin America. However, as a
town goes older, there is often a move towards sex equalization.
The most important implication of the youthfulness of the urban population is the
relatively high proportion of economically active people. Although for the countries as a
whole the enhanced infant survival rates would imply that the proportion of the children
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below fifteen years of age is constantly rising and the relative size of the economically
active population consequently decreasing if the position in urban centres can be
expected to be the exact opposite. With continued in-migration, this proportion has
continued to rise and the task of finding them gainful employment is perhaps one of the
greatest challenge in underdeveloped countries today.
Urban un-employment and the growth of the informal sector
The current strategy of industrialization in most less developed countries has had the two-
fold effect of attracting to the urban centres a sign a significant proportion of the
economically active population while being able to employ only a small fraction of them.
The failure of manufacturing to activate the overall economically active population while
being part of manufacturing to activate the overall economy and provide employment
opportunities in different sectors has been a major cause of urban unemployment in
underdeveloped countries. Nonetheless it is increasingly being realized that this situation
does not fest itself wholly as one open unemployment. Although open unemployment is
still recorded by far the majority of the unemployed find inadequate outlets in various
low productivity enterprises especially in the tertiary section of the urban economy,
called variously the informal’ the ‘bazaar’, the ‘lower circuit’ economy, this category of
urban activity is gradually being appreciated as representing more than just employment
for the majority of urban residents in underdeveloped countries.
The situation in the informal sector is in sharp distinction to that in the ‘formal’ sector of
the urban economy. The latter embraces activities which are identifiable by legal
definition and by the protection offered to workers by such legal recognition. It
comprises public servants and private enterprises of a certain size which through the
availability of capital and certain size which through the availability of capital and formal
management control, are exposed to less fluctuations in revenue. By contrast the
‘informal’ sector comprises numerous owner-operated activities and job opportunities
offered by individuals who purchase merchandise or services generally on a short term
basis. These include such activities as traditional crafts, small scale repair services,
construction works and domestic services of various kinds. This sector is characterised
by low wages, occupational instability and the absence of a social welfare system.
The informal sector provides services and goods to the poorer class in the population who
may not have regular access to identical services or goods produced in the formal sector.
In absolute terms and with respect to specialization and diversity, the importance of the
informal sector increases directly with the size of cities. This is because in the big cities,
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not only is the size of the poorer population more considerable but subsistence
consumption includes a larger number of goods and services which tend to be expensive
when sold in the formal sector but which can be offered in the informal sector in very
small quantities and often at affordable prices.
The critical issue, however is how far the growth of the informal sector represents a
developmental response in the cities of underdeveloped countries. On the other hand it
has been suggested that although earnings per worker are low in the informal sector as a
whole, it has been increasing overtime and doing so much faster than average incomes in
playing a benign role in the process of development in present day underdeveloped
countries and thus deserving policy recognition and programmatic support.
Environmental problems of cities in underdeveloped countries
Given the irregular and low wage characteristics of employment for a large majority of
the urban population, it is easy to appreciate that their disadvantaged position will be
reflected and reinforced by a walk of life characterised by substandard housing,
precarious conditions of nutrition and health, low levels of precarious conditions of
nutrition and health, low levels of education and consumption and generally degraded
environment.
The housing problem is perhaps the most critical of the environmental conditions. High
land values combined with other aspects notably the high cost of building materials have
place most conventional types of dwelling units beyond the means of the majority of
urban residents. The situation is aggravated by the rigid adherence of urban authorities to
standards of materials and construction which derive from experience in the metropolitan
countries and bear little relation to local resources availability. Usually it is against such
unrealistic standards that governments in many of these countries proceed to argue the
existence of a housing deficit, a deficit which were it to be met would still leave the
housing problem of a large section of urban population unresolved because they are in no
position to pay or meet the maintenance obligations of such houses. With this realization,
urban economics emphasizes that we should not be surprised to find low quality or even
slum housing. If poor people can afford only low quality housing, the private housing
market will supply that type of housing by allowing the gradual deterioration of
buildings.
It is however undeniable that various housing efforts of governments in underdeveloped
countries do meet some needs. Often described as ‘low-cost’ housing and offered to the
public at generous interest rates, these houses are bought, lived in or let out by the middle
class of public officers, traders and businessmen, such activities nonetheless represent an
unwarranted and inequitable transfer of social resources from the less to the more affluent
class in society. In short, the cities in underdeveloped countries show a strong investment
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bias in favour of the relatively well-off. For many migrants into the city, however, and
particularly those in the informal sector not even the overcrowded accommodation and
limited services available to the low wage earning group are within their means given the
highly irregular nature of their employment and income. For such individuals, the only
solution is a self-construction of a shelter using materials that are at hand and squatting
on any vacant land, usually on the periphery of the city in the enclaves suffering from
specific disabilities like swampiness. The ……….. is the phenomenon squatter
settlements which have become a distinctive feature of cities in underdeveloped countries
especially in the last thirty years. The fact is that governments in most underdeveloped
countries do not accept such settlements and are constantly engaged in projects to evict
the squatters and to clear their slums. Such periodic misapplications of effort is
undertaken to improve the international public image of the particular city and ensure that
housing standards are maintained. Sometimes of course this is done because in market
terms the land on which the squatter settlement is established is now prime development
land.
But no matter how different the reasons may be, these slums appear again immediately
somewhere else and often in the immediate neighbourhood. So such poor living places
which are sometimes the breeding places of diseases and where the capitalist mode of
production confines workers night after night, are not abolished; they are merely shifted
elsewhere. It is this refusal to accept the legitimacy of these settlements more than
anything else that precipitates them into environmental hazard.
In the first place, once government agencies move in to destroy them, confidence and
expectations are also shattered in the process. Instead of striving to improve the
constructions are done in the most expendable materials and little investment of time and
energy is devoted area. In the second place, the government continues to treat the area is
virtually non-existent. Hardly any services are provided except perhaps transportation
and the people are forced to make their own arrangements particularly for water supply
and refuse and sewage disposal. In the third place, given the rather spontaneous manner
in which these settlements develop and the consequent absence of an orderly layout, the
disposal of refuse and sewage poses peculiar problems. This constitutes a major factor in
the degraded condition of urban development for underdeveloped countries.
In short, one of the most significant environment problems of urbanization in
underdeveloped countries is how to give the majority of the population a sense of
belonging, a feeling of having a stake in the future of the city. This problem is bound to
assume even greater importance in future unless the current strategy of urbanization in
these countries is drastically reviewed.
Urban Transport
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Many urban centres of the world today have come to realize that traffic congestion has
become a feature of city life. Let us look at how people travel in urban areas and
examine what we can learn from welfare economic about the socially efficient means of
travel. Many of us like travelling by private cars. They provide door to door transport.
We can listen to music and we do not have to hang around waiting for buses or trains.
Yet supporters of public transport would argue that cars pollute and congest our cities and
use much more fuel that public transport. So if people were to turn to public transport
there would be far less polluting and congestion and total fuel consumption would fall by
using their car, people reveal that the benefit to themselves in comfort and convenience
exceeds the equivalent benefit of using public transport.
Congestion and pollution are most severe in cities during the rush hour. Welfare
economics tell us that by charging people for joining busy roads. We could make
individuals take account of the social costs they impose on other drivers and this may
reduce congestion in cities. For example cities entirely surrounded by water can levy
tolls on bridges into the city. But with many access roads, there is no obvious way of
enforcing road tolls or congestion.
Another way of easing congestion in cities is by ensuring that city centres parking cars
congest city streets during the day, but also because it is one feasible way to deter
commuters using private cars which also congest the cities.
The Financial crisis in cities
We have already mentioned that the population of most urban areas is increasing quite
fast. I would like you to think of the following question before you proceed with this
section.
What we find is that as the population increases, the demand of urban infrastructure also
increases in the same proportion. At a time of high and rising unemployment, the welfare
burden of supporting these people falls heavily on city governments especially in highly
industrialized countries. This means that governments that are unable to finance such
infrastructure effectively are forced to cut back spending and the provision of basic
services and facilities declines.
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Activity 2
What do you think are some of the strains that a city faces as its population
increases

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Summary
This lesson has discussed the economic basis for the establishment of urban centres.
It has pointed out that there are economic agglomeration that activities located in a
particular urban centre will enjoy as a result of being close to each other.
The lesson has also discussed the problems that urban areas face as they grow. It has
noted that the rapid growth of urban centres in underdeveloped countries has brought
to the fore various problems which are manifested not only in the physical forms of
the city but also in the ways they function. These problems have been grouped in this
lesson under five broad categories. These are: increase in urban population, urban
employment, environmental degradation, urban transport and financial problems in
cities.
As with other aspects of current development, the cities in underdeveloped countries
reflect a dual structure of a small minority enjoying many of the resources of
urbanization and the poorer majority having to manage or make out a living as best as
they can.
Indeed, in respect of each of the broad categories of problems, one of the notable
features has been the innovative approaches which the masses of population on their
own have brought to their resolution. An informal economic sector has developed to
provide a means of creating employment migrants and a training ground for their
accession into local entrepreneurship or into formal sector employment as workers. A
settlement form has also emerged to cater for their accommodation needs.

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Further Reading
1. Hoover, E.M. and Giarratani, F. An introduction to Regional Economics, Third
Ed, Alfred A. Knoff, New York, 1984
2. John Hutton, Urban Challenge in East Africa, East Africa Publishing House,
Nairobi
3. Mabogunje, A. L. The Development Process – A Spatial Perspective
Hutchinson

LESSON4
FACTORS THAT DETERMINE LOCATION OF INDUSTRIES
4.0 INTRODUCTION
In lesson three, it was mentioned that there are economies of agglomeration that
industries enjoy as a result of being close to one another. However, the lesson did not go
into detailed discussion of the factors that an entrepreneur will consider as important in
putting his industry in a particular location. This will be discussed in this lesson.
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By the end of this lesson, you should be able to:-
Discuss the location problem in choosing whether to locate an industry in a particular
place.
Discuss the factors that determine the location of industries in certain areas.

Production involves the use of inputs: factors of production and to produce output goods
and services as efficiently as possible. The location of the unit of production, the firm,
will be determined in relation to the source of the inputs and the market for the output.
The major work on industrial location theory has been carried out by economists
attempting to integrate location into the main body of economic theory, in particular into
the theory of the firm. However, location is concerned with spatial relationship and this
has overtime also attracted the attention of numerous geographers.
4.2 The location problem
The location problem must be faced not only by new firms seeking their first site, but
also by established firms relocating. That new firms face a location is self-evident and
that established firms must also face location decisions is perhaps less obvious. The
relocation of an established firm can result from pressures both internal and external to
the firm.
The main internal pressure comes from growth in output, which imposes pressure on the
existing location in particular on the limited floor spaces. External pressures may come
from a variety of sources. They may come from other firms bidding up the price of labour
or perhaps from the government with its local planning controls and national taxation
policies.
It has already been mentioned that in the business world, the firm is the unit that makes
locational decisions. After the location decision is made, the process of manufacturing
will involve the assembly of necessary materials at the plant site along with other factors
of production required. These materials are converted into finished products or outputs
which is then transported to the consumer (market).
In setting up a factory a manufacturer makes three basic decisions which together will
determine his success or failure in business. These are:-
a) Scale production or operation. This includes how much is to be produced and at
what price it is to be offered to the consumer.
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b) Techniques of production that is methods of production to be adopted. This
involves the selection of the appropriate combinations of factors of production or
how much of the factors of production to be used and at what proportions.
c) Location decisions. This concerns where the plant will be sited or located.
These three decisions are interrelated and none of them can be considered in isolation of
the others.
Factors of production (land, labour, capital and enterprise) may be combined in different
proportions for different industries. Some activities for example are labour-intensive that
is they use a large amount of labour of proportion to other factors. Other activities are
capital-intensive that is they use of land than others. But generally some substation
between labour and capital so that firms in the same industry may be find it profitable to
employ different combinations of factors in different locations or for different volumes of
production (output).
Note that it is not satisfactory to base an explanatory study of industrial location on the
four conventional factors of production (land, labour, capital and enterprise). This is
because these are too broad and it is generally necessary to subdivide some if not all of
them in order to identify precisely the major influences at work on locational choice.
Also note that for any form, the combination of factor inputs depends on the cost
structure. The most structure of any form indicates the relative cost of the various inputs
needed to produce a given output or to operate a plant over a given period.
Let us take a locational unit – a single firm a starting point also inquire into its location
preference. What you need to think of first is.
What we find is that in setting up an industry a businessman has to consider several
profits, he will choose the location at which he can make the maximum profits. We can
specify profits in the sense of rate of return on the owner’s investment of their capital and
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ACTIVITY
What constitutes a good location?

effort as a measure of desirability of alternative sites. You must recognize that this
signifies not just the short run profits but the expected return over a considerable future
period since a location choice represents a commitment to a site with costs and risks
involved in every change of location. Note that also the location decision is not made to
exclusion of other considerations such as scale of operation, combination of factors of
production and market conditions.
In any industry costs vary from place to place in accordance with the costs of the
necessary factors of production and the cost of marketing. The total revenue obtainable
also varies from place to place according to variations in demand and price. However,
the most profitable location will be where the total revenue exceeds total costs by the
greatest amount.
4.3 Factors Affecting Industrial Location
Location factors are the factors that an entrepreneur will consider important when
locating an industry. They may include factors like availability of land, labour, raw
materials, market and even the political climate prevailing in a country. Location factors
are difficult to rank in any order of importance. This means that these factors can be
refined into more specific determinants such as the quality and quantity of labour, the
geographical location of a site and availability of the necessary infrastructure. For many
large – scale capital – intensive projects, such as steel works or oil refineries, physical
location factors may be of overriding importance. For many others particularly those
involving factory processes, physical considerations are less importance.
A manufacturer may locate his industry in a particular place either because of all these
factors combined or because of just a combination of a few of them. In the world today,
the today, the distribution of manufacturing industries is the result of two processes. On
the one hand, there is carefully planned location of industries is the result of two
processes. On the one hand, there is the carefully planned location of industry when
alternative sites are examined and on the other the industries whose siting so often seems
illogical and unplanned. However, there are factors leading to their continued existence
and the same factors leading to their decline and ultimate disappearance. A particular
distribution of industrial production is best regarded as the result of the interaction of
many factors some natural and other personal. These vary in number and in the degree of
their influence.
We have so far noted that to produce any commodity, an entrepreneur must assemble at
one point the necessary factors of production. They are conventionally land, labour,
capital and enterprise and they may be combined at different industries. Let us see how
each of these factors can influence locational choice.
Land
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The land occupied by the physical plant is very important. The plant may occupy a
relatively small part of the land area that the firm owns, but land is also needed for such
purposes as the storage of materials and finished products. Land is also important in that
it is needed for the expansion of the industry.
Firms with large requirements for land will find it easy to operate in some places than in
others. For example it will be difficult to find and costly to acquire land in and around
big cities where underdeveloped strong. Expansion may also be prevented by land – use
zoning laws so that even outside urban areas issues such as the preservation of green belts
and areas of outstanding natural beauty may prevent industry from occupying otherwise
suitable land.
Raw Materials
All manufacturing activities require materials since the essence of an industrial process is
the conversion of raw materials into goods which have greater utility.
Industries differ in the number, volume and variety of raw materials which they require.
Some of these materials may be of an extractive nature or goods manufactured elsewhere.
Materials are not openly distributed over the earth’s surface. Some, raw materials are
localized that is, they are found only at specific locations and their transportation costs to
plant sites are a function of distance. This means that we rarely have unbiquitous raw
materials. Ubiquitos raw materials are materials that are found everywhere or universally
distributed so that we have transportation cost of zero. The distribution of raw materials
therefore is a major determinant of plant location since an entrepreneur will want to
minimize transportation costs as much as possible.
Capital
Capital refers to all things made by man for use in the process of production. They
include both the financial capital and the fixed capital represented by the physical plant.
Financial capital is needed before land or any of the other inputs can be acquired. To
firm setting up in business or looking for room for expansion, the process of an existing
building ready for immediate occupation may be a major or even a deciding factor in the
choice of location. This is particularly true if the cost of existing factory is less than the
cost of the existing building ready for immediate occupation may be a major or even a
deciding factor in the choice of location. This is particularly true if the cost of the
existing factory is less than the cost of a new one. The reocuppation of an existing
building often enables a firm to enter business of an existing building often enables a firm
to enter business in circumstances where the cost of a new factory would have been
prohibitive. But most firms need new premises built to their own specific requirements.
They may need to accommodate special machinery or create certain physical conditions.
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The cost of factory construction may also vary from place and this can have an important
bearing on the locational choice of a firm where construction costs form a significant
element in total cost or in initial investment.
Supply of Labour
Labour is needed to operate any industrial plant, but the amount and type required may
vary from industry to industry. In some industries, the labour input is a large cost item
for other activities it may be of only minor importance. The distinctive labour
requirements of particular industries make places more suitable locations than others. A
firm needing a big labour force with a large range of skills will find this easier to obtain
in a major metropolitan area than in a small town.
There is a tendency of labour to move to areas and to industries where it is most in
demand but what we find is that no industry was ever established without the certainty
that an adequate supply already existed or could be made available at short notice. If the
right kind of workers are not available at a location that is otherwise attractive, it may be
possible to obtain them from other local employers since labour is mobile both
geographically and in terms of occupation. This is why the problem of labour supply is
of declining importance with the increased mobility of labour.
Improvement in transport means has encouraged commuters to travel each day distances
which sometimes back would have been inconceivable.
A firm can attempt to attract workers from one place to another by providing attractive
wags or conditions of employment or by enticing workers from neighbouring plants. But
in these days of uniform wage rates negotiated by trade unions, active competition
between firms through wage differentials is often difficult. Today a firm wishing to get
more labour may incur additional costs not so much in higher wages paid as in
expenditure on fringe benefits, welfare and recreational facilities. If also for other
reasons such as access to materials or sources of power, a relatively isolated location is
chosen for the plant, it may be necessary to incur the expense of building houses to attract
the necessary labour.
Increasing mechanization, automation and the tendency to substitute capital for labour
may well be reducing the importance of labour in the modern industrial nation. The
increasing sophistication of industrial processes is reducing the need for unskilled labour
in many industries but the presence of workers with special technical skills can now give
some areas big labour advantages. On the world scale there are still many areas where
the low cost of labour is the main competitive industrial advantage particularly in the
developing countries of Africa and Asia.
Enterprise
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The skills with which the various inputs are combined to produce some good is
dependent on business enterprise. The term enterprise embraces the contribution of the
management at the policy making level. The entrepreneurial function can also be
performed by one man who is the founder of the firm, the major bearer of risk and the
main profit earner. No matter who performs the entrepreneurial functions of the
organisation and management of a firm’s affairs, the skill with which this is done will
have a vital bearing on business success or failure. There are also many places where the
presence of a prominent firm can be ascribed to the fact that it was the home of a
particularly enterprising businessman.
Market consideration
For many firms today access to the market is regarded as the dominant consideration in
choosing a site for a factory. The market is not the only attraction to a metropolitan
location but the large concentrated and relatively large body of consumers found in cities
is certainly the main reason for the relatively rapid industrial growth around the major
urban areas. There is a general tendency for industry to pay more attention to the market
and its manipulation.
The market is created by advertising without which effective demand for the product may
not exist. The amount of expenditure on sales promotion necessary to generate and
sustain demand for a new consumer good today together with the large initial capital
investment involved in most new industrial enterprises makes the achievement of a large
volume of sales of critical importance.
Demand for a product will vary from place to place according to the nature of the product
and the number, type and distribution of potential customers. For some products a
location in an area of relatively high per capita income or purchasing power may be an
advantage. For some other industries especially with regard to perishable goods the main
thing is to have a secure local market with a steady and predictable demand. The market
can also influence plant location through its effect on costs. Finished products have to be
transported to the consumer and in many industries the outgoing freight bill can be a
substantial addition to the addition to the cost incurred in acquiring the necessary inputs
and conducting the process of manufacture. So proximity to the market can thus be an
advantage and to some firms a necessity.
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4.4 SUMMARY
This lesson has discussed the factors that determine the location of industries. These
factors have been identified as land, raw materials, capital, supply of labour, enterprise
and availability of market. It was noted in the lesson that it is not satisfactory to base
and explanatory study of industrial location on the four conventional factors of
production (labour, land, capital and enterprise). This is because these factors are too
broad and it is necessary to subdivide some if not all of them in order to identify
precisely the major influences at work on locational choice. The lesson has brought out
the fact that an entrepreneur is in business to try and earn maximum profits and reduces
costs as much as possible. Costs vary from place to place in accordance with the costs
of the necessary factors of production and the cost of marketing. Total revenue
obtainable also varies from place to place according to variations in demand and price.
It was however mentioned that the most profitable location is the one where total
revenue exceeds total costs by the greatest amount.

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4.5 FURTHER READING
John Glasson, An Introduction to Regional Planning, second Ed., Hutchinson,
1978, ch.6
Hoover, E.M. and Giarratani, F. An Introduction to Regional Economics, Third
Ed, Alfred A. Knoff, New York, 1984. Ch 2

LESSON 5
URBAN DECAY AND RENEWAL
5.0 INTRODUCTION
In lesson 3, we saw that urban areas have very important roles to play. Urban areas must
then grow with time so that they can play these roles effectively.
But as they grow, sometimes into big cities, a time comes, when they start experiencing
decay or decline. There are several factors that lead to this urban decay and this is what
this lesson will deal with. The lesson will finally explore various methods of urban
renewal.
5.2 URBAN DECAY
Cities grow to serve various functions. Some cities have grown as trading centres, others
as centres of commerce and communication, industrial centres, educational and others as
administrative centres. Thus cities grow to tap some scale economies of large scale
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By the end of this lesson you should be able to:
1) Explain the concept of Urban Decay
2) Discuss the factors that contribute to urban decay.
3) Explain the various methods of urban renewal.

operations. But though cities seem permanent to man in his short life time, they are in
constant growth and decay. Many cities of the world were built during the period of
Rapid City growth before 1914. These cities, once young and vigorous, have in recent
years begun to exhibit the debility of old age. Housing has deteriorated and even if
physically sound, is often unsuitable for modern living. Arrangements for access and
parking are ill-suited to the age of motor vehicle; new industries have preferred to settle
in the surburbs where there is more space and better facilities, city can therefore be seen
as a process of falling off from a thriving condition of cities, that is progressive decline
leading to city deterioration and this may eventually lead to the dwindling away of a city.
The present city decay has not been caused by a single factor, it is a multiple of factors
which eventually cause a city to collapse.
5.3 FACTORS LEADING TO CITY DECAY
Before I discuss the factors that lead to city decay I would like you to think of the
following questions.
1. Rapid Population Growth Rates in Cities
The population of majority of countries of the developing world is currently growing at a
very high rate. In Kenya for example, this is particularly true of the urban population
which has been increasing primarily as a result of accelerating rural – urban migration as
well as the natural rate of increase so that in the last two decades the urban population of
Kenya has been growing within the range of 6.5 to 8.5 per cent per annum. This high
growth rate erodes the basis for resource utilization; it erodes the base at which a city
should grow. Due to increased need for additional basic services and facilities the scarce
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ACTIVITY
What do you think are some of the factors that make cities fall off from thriving
conditions to total deterioration?
As we have already mentioned there are several factors all working together
and leading to the progressive decline of cities. This lesson discusses these
factors.

resources are diverted to cater for these facilities. This leaves the city with no resources
to plan for more resources and siphoned to cater for these basic needs.
2. Housing Problems
It is the obsolesce and deterioration of the housing stock more than anything else that has
led to a downward spiral of most cities of the world. In most of the less developed
countries big cities have an acute shortage of houses. This has led people to live in
poorly maintained housing units which are mainly occupied by the lower income groups
with the relatively better off taking the option of moving out to the city suburbs where
there is more space. The problem has led to the growth of shanty towns. The population
growth in these shanty towns. The population growth in these shanty towns is high in
excess of even 20 per cent per annum. The conditions in these shanty towns are pathetic,
characterised by few or no toilets, overflowing sewage systems, stained roofs and sooty
walls. It becomes more serious during the rainy season when the roads are impassable.
With the increase in population the unskilled people become increasingly segregated
from the rest of the society and concentrate within the inner city. The inner city is also
inhabited by the unemployable populations such as beggars and the blind in search of
charity. These populations concentrate in large houses rented out to many families.
These houses cannot pay for their repair and they are just watched as they deteriorate. So
city housing problems have led the development of some cities out of control. From our
definition a city should contain permanent structures so the slum conditions are killing a
number of cities of the world and as more and more slums continue to grow these cities
continue to decay.
3. Transport Problems
In most cities in the less developed and even in developed countries, chaos is the best
word to describe the transport problem. This chaos can be attributed to drivers and
pedestrians not following the traffic rules. There are mixed transportation modes
competing for roads such that in addition to buses and cars there are motor cycles, taxi
cabs, trucks and bicycle which all mix in the traffic flow and this makes the traffic
control a complicated problem. The problem is worsened by insufficient road area, poor
design of the road network, lack of overall and systematic planning, poor design of traffic
control facilities and the menacing free and non restricted road side parking. There is also
rush hour congestion, undisciplined drivers and a lot of road accident. All these factors
reduce the availability of road area and also complicate the traffic condition.
4. Technological Forces
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Within the last few decades technological forces have united against the city in a number
of ways. A number of classical cities of the world have been crippled by technological
forces. For example a survey conducted in America in the city of St. Louis indicated that
25 per cent of all housing units are abandoned. Construction of big industries and the use
of too many vehicles is killing the city.
5. Movement to the Suburbs
People want privacy and are ready to pay for it. This has led towards suburban single
family dwelling units. In recent times people have shown a high preference for living in
the suburbs rather than the central cities. This behavioural pattern has been attributed to
high security and attractive new housing in the suburbs. Others have argued that the love
for neweness, nearness to nature, freedom to move, individualism and the avoidance of
high city taxes are some of the factors causing movement to the suburbs. There is also
the rising crime rate and the failure of the rule of law in some large cities, a situation
which indicates a trend towards the decay. This appears to be a hard trend to reverse and
because of it the core of the city will continue to decay.
6. Financial Problems
In less developed countries and even in developed nations, many poor people tend to love
living in towns. This erodes the tax base. They influence the rating system of financing
for social goods and this major cities have lacked the finance to support themselves after
attaining the status of a city and this is because it is expensive to run a city due to high
costs of administration and provision of services. In countries like America some
economist have argued that cities are an expensive drain on the economy because all the
unemployables are attracted to the cities for free ride on social welfare facilities.
7. Nutritional and Health Problem
Human and balanced nutrition are essential for human productivity. Even though health
facilities are more available in urban areas than rural area, they are often inadequate to
the needs of the mass of the population especially in cities where population is growing
rapidly. New health threats grow from the crowded unsanitary urban residential
neighbourhoods and contaminated water supplies. The situation is worsened by serious
congestions in the existing urban hospitals. These problems lead to the progressive
decline in the life of cities which is a way of decaying.
8. Environmental Problems
There are pollutions of all kinds in the world cities; there is air pollution, water pollution,
noise pollution and land surface pollution. Massive growth of industries has greatly
contributed to air pollution in a number of cities. Waste dumped anywhere in our cities
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pollute the scarce land surface we have in the cities. This is worse during the rainy
seasons because such dumped up areas provide a good breeding environment for
mosquitoes. Water pollution is also a major problem, most of which is caused by refuse
dumped in rivers. The use of all sorts of mechanical tools and large numbers of vehicles
and to the problem through noise pollution. Thus the environmental problems are strong
forces causing the decay of a lot of cities.
9. Some old causes of city decay
Big cities in the medieval times were known to decay and in this case fall due to decline
in trade which had caused their growth. Others were crippled by warfare. Thus all the
medieval cities and towns were surrounded by strong walls to keep away foreign
invaders. Even in the present time, cities have been known to be destroyed by natural
disasters such as earthquakes and volcanic eruptions.
5.4 STRATEGIES FOR URBAN RENEWAL
Urban renewal is not a new phenomenon, if it were, the centres of big cities like London
Paris or Cologne would be the same as they were in the middle ages.
Change takes place when individual buildings are redeveloped or modernized, when new
streets are built or when public urban renewal programmes are initiated. Nevertheles, the
renewal of urban districts poses two technical problems among others. Firstly, the
existing property boundaries may not be suitable. For example larger sites may be
needed. Secondly, there is a need for some co-ordination at a level above that of the
individual site and this sometimes may not be achieved.
Strategies to conserve the cities from decay differ from country to country because of the
relative availability of finance and management and recording to the degree in which
institutions are flexible. Strategies available for city renewal include.
Congesting the City
This calls for concerted efforts geared towards the improvement of road network and
traffic control system. This can be achieved by increasing the supply of vehicular roads
thus reducing the demand for road usage. The authorities concerned can ensure that there
is efficient control of traffic and instill discipline into road users. There is also need for
improved and adequate parking grounds, forbid street parking and towing away
immediately of all broken vehicles.
The construction of sidewalks and zebra – crossings should be emphasized to reduce
competition of road usage between vehicles and pedestrians and lastly to reduce the
number of strips to be made each day by improving the efficiency of the telephone
system. Affected cities should also try the strategy of deflecting the flow of migrants to
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the city. This strategy was once tried in Lagos and succeed to a certain extent.
Government offices were relocated away from the city centre. This strategy also calls
for population control to reduce congestion in cities which leads to increased demand for
limited city services.
Improvement on Housing
This strategy will focus itself mainly on improvement of slum environment. This is by
improving of basic infrastructure in slum areas and raising the incomes of slum dwellers
to permit them to make improvements on their own physical environment. To achieve
this, there is need to raise the productivity and incomes of the informal sector because
majority of informal sector workers live in slums.
Another strategy is slum clearance to which success depends on how it is effected. The
general tendency has been to clear slums in one estate and they come up in the adjacent
estate. This lesson suggests that if funds are available, slums can be cleared by pulling
down a few houses at a time and building modern houses with four or five floors in their
original place.
After this people can be allocated rooms in the new modern houses. More still there
should be encouragement of people to build their own houses through provision of soft
construction loans.
Also to improve the physical conditions of the existing slums, employment should be
provided for the unemployed and the earning capabilities of the employed should be
increased. There should be extra efforts to make the unemployable employable through
organizing of skill training schemes. Thus improvement of the slum conditions will do a
lot to save our cities from decaying.
Employment
Most of the financial, social and economic constraints in the cities are as a result of large
numbers of unemployed people. So both formal and informal sectors should be
considered in the role of training and raising the skill level of the labour force. This
requires developing a flexible training scheme to transmit manual and entrepreneurial
skills especially in the informal sector. The informal sector should also train craftsmen
who after apprenticeship and taste of hard work in the cities must return to their places of
origin or move to smaller centres in the hinterland where there is demand for their skills.
This will also assist in deflecting migration away from the cities.
Environmental conservation
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There is need to control all types of pollution. More care is called for in prevention of
water pollution. City authorities should organize to supply purified water for domestic
use. Water pollution calls for more attention because of the degree to which is
unavoidably imported from neighbouring areas. Some streams entering the city areas
may already have been polluted higher up by factories or untreated sewage systems. This
calls for cooperation from all relevant authorities if pollution is to be reduced. Cases OF
disposing wastes especially in rivers should be dealt with by fining those concerned.
ECTURE 6
THE ROLE OF MUNICIPAL COUNCILS
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5.5 SUMMARY
This lesson has discussed the factors that lead to city decay and the strategies
available for renewal of cities. The factors that have been discussed here as
contributing to city decay are: rapid population growth rates in cities, housing
problems, transport problems, technological forces acting against cities, movement
of people to the suburbs, financial problems, nutritional and other health problems.
For city renewal governments need to decongest cities, improve city housing,
provide employment opportunities, conserve city environments and provide health
and other social services.
City decay has led to growth of secondary towns and highly industrialized and
urbanized suburbs and this has led to extensive inner city decay. However, the
residents of a city must always be proud of their cities because they go there to live
a good life. This means that cities must be conserved to serve the various functions.
Recent studies have revealed that many countries have engaged themselves in
various strategies to revitalize their cities. A good example is Lagos in Nigeria
where different strategies are being enforced to rescue the city from decay. This is
with the realization that cities grow to serve various positive functions and
therefore must be revitalized. This shows that with the necessary efforts, resources
and political will the situation of cities can be restored by creating strong forces to
work against city decay.

LESSON 6
THE ROLE OF MUNICIPAL COUNCILS
6.0 INTRODUCTION
Lesson five mentioned that cities will not just thrive forever. There are several factors all
working together to reduce the good looks of a city. If a city is to stay looking good it
means that somebody somewhere has to take the responsibility of maintaining facilities
and providing essential services.
This means a city will not just be left to decay but will be renewed every time certain
areas show signs of decline. In most cities, municipal councils have been given this
responsibility. This lesson discusses what municipal councils do to maintain cities.
6.2 FUNCTIONS OF MUNICIPAL COUNCILS
The system of local government dates back to 15th
Century in Britain and 18th
Century in
United States. They were set up to assist state governments in carrying out certain
responsibilities.
Municipalities were established in order to provide essential local services for the
inhabitants of urban settlements. They are formed by acts of Parliament.
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By the end of this lesson you should be able to:-
 Discuss the various functions performed by Municipal Councils.
 Explain how Municipal Councils obtain funds to finance the various sections in
the urban Public Sector

In Kenya, the local government act chapter 265 of the laws of Kenya contains the rules
and regulations governing the operations of municipalities, towns and Urban councils.
The head of a Municipal Council is the Mayor of municipal affairs. Each Municipal
council has various sub-committees for the smooth running of its various departments
like housing, health, education and other social services. The President has the power to
nominate councilors to various municipal councils and to assist the elected ones in
decision making. But due to his other responsibilities in the government he delegates the
power to nominate councilors to the Minister for Local government.
The Mayor and his council take a term of five years in office but the Minister has power
to dissolve a council and appoint a commission to administer the council, should it fail to
deliver the necessary goods and services efficiently due to poor management. For
example in 1982 the Nairobi City Council was dissolved by the Minister for local
government due to poor management and since its operations have been managed by an
appointed commission.
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Why Urban Public Sector?
Before I discuss this section I would like you to think of the following questions
ACTIVITY 1
1. What kind of services do you think Municipal Councils provide to City
Settlements?
2. Why do you think these services should be provided by an appointed council
and not a single individual?

Large numbers of goods and services available within urban areas are supplied by local
authorities rather than private firms. So we find that considerable proportions of
investments especially in infrastructure within cities are carried out by urban
governments.
Municipal authorities provide a wide range of goods and services which can be
categorized under the following headings
1. Utilities
 Primary and secondary Education
 Public health
 Public transport
 Housing
 Libraries
 Markets and shopping centres
 Recreation facilities
 General administration
2. Protection
 Police
 Fire services
3. Other services
 Water supplies
 Refuse disposal
Local government involvement in the provision of public goods can be justified on
several macro-economic grounds
1. Some goods and services are what are known as public goods and would not be
available if supply was left to private entrepreneurs.
2. Certain goods and services are best provided by monopoly agencies and to prevent
the exploitation of consumers, local authorities have taken on the role of suppliers.
3. Some goods and services generate negative externalities and therefore intervention by
city authorities is justified to minimize the social costs their production and
consumption impose on urban communities.
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4. In some instances it is felt necessary for welfare reasons to provide goods and
services to the poorer sections of the community at uneconomic rates to offset the low
income levels of these groups.
5. The decisions made by individuals within urban communities may often be made in
ignorance of the actions, intentions and anticipations of others and consequently may
not always be in the best interests of the population as a whole. So when such points
are considered, there may be considerable justification for a degree of local
government planning to maximize social welfare.
A public good exists when each individual’s consumption of such a good leads to no
subtraction from any other individual’s consumption of that good for example national
defence. Such goods are characterised by jointness or joint consumption. In the urban
context, public services, fire protection, urban roads broadly exhibit this characteristics.
Although an individual’s consumption has not effect on the supply of good available to
others, it is difficult to exclude an individual from consuming the good. Therefore
jointness combined with high exclusion costs gives no incentive to private enterprise to
enter the market as suppliers. Some types of urban services are natural monopolies e.g.
sewage plants. There is little logic in having sewage plants duplicated. When monopolies
of this kind occur, the urban authorities can either control them by manipulating the
economic framework within which they operate, in order to prevent exploitation of the
consumer or else the urban authorities can provide the good or service themselves. The
choice between these alternatives is political rather than economic. One school of
thought may maintain that private enterprise is more efficient than the public variety
hence favouring monopoly regulation and the other preferring public – sector ownership.
Certain urban activities generate negative external effects and it may be necessary for
local authority intervention to control them. This may be done by providing services
themselves to remove the damage e.g. collection and disposal of refuse. In other cases
the authorities supply alternative goods to attract consumers away from those generating
undesirable external effects e.g. the provision of public transport to discourage the use of
private motor cars which contribute a lot to pollution.
Urban public authority often provides a range of goods and services either at prices below
their real cost or else free of charge. It is felt that these goods and services are in some
way necessary and to deprive the community simply because their income is insufficient
would be unjust.
Someone has to pay for these goods and services and this is usually through taxation.
This policy represents a redistribution of income in favour of the poorer members of the
urban community.
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By having a substantial public sector, it is, possible for a local authority to act as a
stabilizing agent and to even clear out cyclical fluctuations in the cities economy. For
example when local unemployment levels rises, the authority can increase its spending
say on a programme of council house buildings or land clearance and via a local
multiplier effect create more jobs in the area. However, the limitations of this sort of
policy lie in the openness of the local economy and in most cases the impact of increased
public – sector activity may not likely be large.
Municipal Education and Housing Stock
Among the most important utilities provided by municipal councils is education.
Education is the central link in urban population's aspirational claim. Among African
urban dwellers, it is aspired to and when obtained forms the basis for additional
aspiration. The need for education is high in urban areas because of the personnel
required for a modern infrastructure. The modernization or Africa calls for technical
skills to construct buildings, run machines, man bureaucratic posts and conduct scientific
experiments with the population explosion in urban areas und the requirement of
modernity, qualified teachers and appropriate, school facilities necessary to meet the
demands for education are not available in adequate amounts inurban, areas. Even-if,
teachers, and facilities were available many children in African urban areas will not have
the funds "; to enter schools or continue their education to the level where societal needs
and aspirations would be satisfied
The great demand for education in African towns combined with the lack of
educational opportunities has led to the establishment of many illegal and irrelevant
schools. Unofficial schools are set up to give young people a feeling of educational
accomplishment although the substance of education in these schools is of dubious
value and the schools entrepreneurs are usually concerned with money rather than
education.
Other utilities which are provided by municipal councils include dispensaries and health
centres, cultural activities, welfare and recreation, playgrounds, parks, recreational halls,
and stadia are catered for by local urban authorities. In Nairobi, parks such as Uhuru
park and Uhuru gardens are some examples of recreation facilities provided by the
Nairobi City Commission. In other towns like Nakuru and Kisumu Municipalities
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provide similar goods and services though in smaller scale due to the- size of the
respective populations.
Urban authorities supply housing to-urban communities. In recent years in countries like
Kenya there has been a national shortage of houses and as a result private enterprise has
stepped in to supplement urban authorities. The local councils are the Primary housing
authorities. The power exercised by local authorities are extremely wide and include the
provision of municipal housing through new buildings, inspection of properties to ensure
the maintenance of satisfactory standards, the exercise of powers and duties relating to
clearance of areas, unfit houses improvement and provision of temporary accommodation
for the- homeless.
Most respectable local authorities now have a director of housing or housing in
charge of a housing department to perform the above functions and ensure that a
comprehensive approach is adopted towards all aspects of housing provision.
6.3 Financing of Urban Public Sector
We have mentioned several goods and services that municipal provide. But how do
they obtain funds to finance such goods and services?
The increased expenditure of local authorities in recent years of countries has created
considerable problems of revenues raising. Raising money has presented difficulties.
Local revenues have failed to keep pace with expenditures and central governments have
had to provide an. increasing amount of money. This is exacerbated embezzlement of
funds -by those in office and virtually all municipalities especially in Kenya are in one
way or another in financial problems.
Sources of finance available to local authorities include:
 Property taxes
 Central government grants
 Loans from financial institutions
 Grants from other bodies e.g. World 'Bank.
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In raising revenue from provision of certain services, the difficulty lies in deciding upon
appropriate price to charge. There is also the problem of poor management and
accountability when it comes to manning of these services.
The lesson has also mentioned the various sources of finance various sources of finance
available to municipal councils which range from funds collected from provision of
goods and services to borrowing from financial institutions.
It was noted in the lesson that with the increasing population in a number of countries,
the aggregate size of the urban public sector has continually expanded especially in the
post war period. In Kenya for example the size has expanded rapidly in the post
independence period. Because of this rapid expansion of urban public sector, forecasts
suggest that the size of local budgets will increase further in future. This is because the
cost of services provided have risen quite rapidly while services have also been extended
both in range and quality.
Central governments have also been active in their Efforts to assist the municipal
councils to ensure that the services are provided to the residents of the various towns
effectively. For example transportation 'in the city of Nairobi has been mainly in the
hands of the private set-tor But this sector could not cope with the transportation needs of
the residents until the government introduced the "Nyayo Bus Services" to supplement
the private sector. So successful operations of municipal councils in Kenya and
elsewhere will depend on the combined efforts of both the councils and the central
governments.
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6.5 Summary
This lesson has discussed the various functions carried out by municipal councils.
Municipal councils provide essential services to city residents such as provision
of houses, water, education facilities, transport facilities, maintenance of road and
refuse collection among other.

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6.6 FURTHER READING
1.The Local Government Act, chapter 265, Government Printer Nairobi, Kenya, 1986.
2. Knox P. Urban Social Geography:An Introduction, Longman Group 1983.

LESSON 7
MAJOR PROBLEMS AND SUBJECTS OF RESEARCH
AND ANALSYIS IN URBAN ECONOMIC
7.0 INTRODUCTION
There are several subjects that come under this broad topic but this lesson will
concentrate on two main subjects. The first area to be discussed will be rural-urban
migration and the second will be rural-urban economic relationship.
7.2 RURAL-URBAN MIGRATION
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At the end of this lesson you should, be able to:
1. Explain how rural urban migration affects both rural and urban areas.
2. Analyze the Torado Migration Model
3. Describe how less developed countries can tackle the rural urban migration
problem.
4. Discuss the relationship that exists between rural and urban areas.

One of the most perplexing problems presently facing the Less Developed Countries
(LDCs)is that of massive movements of people from the rural areas to the cities. You
will find a correlation between this lesson and the previous lessons in that it is the
increasing rural-urban migration of people which in part has caused the present
unemployment problem in urban areas which was discussed in lesson three. This
migration overtime has also contributed to urban decay as discussed in lesson five
since the increased urban population that results from migration willrequire more of
urban infrastructures since such infrastructures in most urban areas are available only
in limited supply, there will be a tendency of overtaxing the available ones thus
leading to their degradation
This section will outline- some general facts of migration in developing countries. It will
also discuss the effects of migration on both rural and urban areas. It will then discuss
the Todaro migration model which explains why migrants continue to move to urban
areas when they are already aware of the problems, of acquiring .lobs there. Finally
policy options will be suggested that LDC governments may pursue them in order to
curtail the excessive flow of people to urban areas and to some extent, solve the
increasing unemployment rates in these urban areas.
Migration in Developing Nations: Some general Facts
An understanding of the causes and determinants of rural-urban migration and the
relationship between migration and relative economic opportunities in urban and rural
areas is central to any analysis of Third World employment problems. Since migrants
comprise the majority of the urban labour force in developing nations the magnitude of
rural-urban migration has been and will continue to be the principal determinant of the
supply of new job seekers. If migration is the key determinant of the urban labour
supply, then the migration process must be understood before the nature and causes of
urban unemployment can be understood. Government policies to ameliorate the urban
unemployment must therefore be based in the first instance on knowledge of who comes
to town and why.
The factors influencing the decision to migrate are varied and complex. Since migration
is a selective process affecting individuals with-certain economic, social, educational and
demographic characteristics,-the relative influence of economic and non economic factors
may vary not only between nations and regions but also within defined geographic areas
and populations. However, there now seems to be widespread agreement among
economists and non economists alike that rural-urban migration can be explained
Page 50 of 73

primarily by the influence of economic factors. These include not only the 'standard 'push
from subsistence agriculture and ‘pull’ of relatively high urban wages.
In the past, rural - urban migration was thought to be a natural process in which surplus
labour was gradually withdrawn from the agricultural sector to the industrial sector for
urban industrial growth. The process was socially beneficial since human resources were
being shifted from locations where their social marginal products were often assured to
be zero to places where these marginal products was not only positive but also rapidly
increasing as a result of capital accumulation and technical progress. But in contrast to
this point of view it is now clear from recent LDC experience that rates of rural-urban
migration continue to exceed rates of urban job creation and surpass greatly the capacity
of both industry and urban social services to effectively absorb this labour. Migration is
no longer viewed by economists as a beneficial process necessary to solve problems of
urban labour demand. On the contrary, migration today is seen as the major contributing
factor to the urban surplus labour and a force which continues to worsen the already
serious urban unemployment in LDCs.
7.2.1 Migrant Characteristics
We can divide the main characteristics of migrants into three broad categories:
demographic, educational and economic
i) Demographic Characteristics
Urban migrants in LCDs tend to be young men and women between the ages of 15 and
24.
(ii) Educational Characteristics
One of the most consistent findings of rural-urban migration studies is the positive
correlation between educational attainment and migration. There seems to be clear
association between the level of completed education and the propensity to migrate those
with more years of schooling, everything else being equal, are more likely to migrate than
those with fewer. A study done in Tanzania on migration showed that secondary school-
leavers constituted proportion of the migration stream. The explanation offered for this is
that limited urban employment opportunities were being rationed by educational levels
and only those workers with some secondary education had a chance of finding &job.
Those with only some primary school education found it very difficult to secure
employment. Their proportionate numbers in the migrant stream therefore showed a
declining trend.
(iii) Economic Characteristics
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For many years the largest percentage of urban migrants were those poor, landless,
unskilled individuals, whose rural opportunities were for the most part non existent. In
colonial Africa, seasonal migration was predominant with migrants from various income
levels seeking shore-term urban jobs. Recently however, with the emergence of a
stabilized, modern industrial sector in most urban areas of the less developed countries,
the financial assets of migrants from rural areas have become important only to the extent
that individuals with larger financial resources can survive longer while searching for the
elusive urban job. In short, migrants seem to come from all socioeconomic strata with
the majority being very poor only because most rural inhabitants are poor.
7.2.2 Effects of Rural Urban Migration
The significance of rural-urban migration lies in its implications for economic
development. Migration worsens rural-urban imbalances in two ways:-
1. Migration increases the growth rate of urban job seekers. The presence of these
migrants in urban areas tends to swell the growth of urban labour supply while
depleting the rural areas of valuable human capital.
2. Migration also puts a strain on urban job creation since additional jobs in- the
industrial -sector require substantial complementary factor input;-, which is hard for
most LDCs to accomplish.
7.3 THE TODARO MIGRATION MODEL
Starting from the assumption that migration is primarily an economic phenomenon which
for the individual migrant can be a quite rational decision despite the existence of urban
unemployment, the Todaro model postulates that migration proceeds in response to urban
- rural differences in expected rather than actual earnings. The fundamental premise is
that migrants consider the various labour market opportunities, available to them as
between the rural and urban sectors and choose the one which maximizes their expected
gains from migration. Expected gains are measured by the difference in real incomes
between rural and urban work and the probability of a new migrant obtaining an urban
job. The theory assumes that members of the labour force, both actual and potential,
compare their expected incomes for a given time horizon in the urban sectors. The
difference between returns and costs of migration with prevailing average rural incomes
and migrate if the former exceeds the latter.
For an illustration of the above, consider an average or semi-skilled rural worker who has
a choice between being a farm labourer (or working his own land) for an annual average
real income of say 50 units or migrating to the city where a worker with his skills or
educational background can obtain wage employment yielding an annual real income of
100 units. In this case, if the income differential factor acts as the major determinant of
Page 52 of 73

the decision to migrate then the worker will move to the city. This is because his
objective is to seek the higher – paying urban job.
It is however important to note that the above described migration model only fits well in
the context of advanced industrial economies and assumes the existence of full or near
full employment. In a full employment environment, the decision to migrate can be
based solely on the desire to secure the highest paid job whenever it becomes available.
This same analysis is not realistic in the context of the economic framework of most
LDCs. This is because LDC economies are beset by a chronic and serious
unemployment problem with the result that a typical migrant cannot expect to secure a
high - paying urban job immediately. In fact, it is much more likely that upon entering
the urban labour market many migrants will either become totally unemployed or will
seek casual and part-time employment in the urban ‘traditional' or 'informal' sector.
Consequently, in his decision to migrate the individual must balance the probabilities and
risks of being unemployed or underemployed for a considerable period of time against
the positive urban-rural real income differential. The fact that a typical migrant an expect
to earn twice the annual real income in an urban area than in a rural environment may be
of little consequence if the actual probability of his securing the higher-paying job within,
say, a one ear period is one chance in five.
7.4 Some options to reduce rural — urban migration
There are several ways through which the problem of migration can be curbed. These
are discussed below.
1. Reduce imbalance in urban-rural employment opportunities
Since migrants are assumed to respond to differentials in expected incomes, it is
important that imbalances between economic opportunities in rural and urban sectors be
minimized. Permitting urban wage rates to grow at a greater pace than average rural
incomes, will stimulate further rural-urban migration in spite of rising levels of urban
unemployment. This heavy influx of people into urban areas gives rise not only to -
socio-economic problems in the cities but mayalso eventually create problems of labour
shortages in rural areas especially during the busy seasons..
The main thrust of this activity should be in the integrated development of the rural
sector, the spread of small-scale industries throughout the countryside and the
reorientation of economic activity and social investments towards the rural areas.
Elimination of factor price distortions
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Thin will involve the elimination of various capital subsidies and trade union pressure on
wages so that factor prices fleet their scarcity levels. This correction of factor price
distortions is partly expected to solve both rural and urban unemployment problems and
migration through firms employing increasing numbers of the cheap fa.-1.ur- of
production labour especially in the rural areas.
Choosing appropriate labour – intensive technologies of production
Most less developed countries are dependent" on imported technology from developed
countries which for the most part in capital - intensive. This dependence inhibits
employment creation. To solve this problem, efforts (both domestic mid international)
should be made to reduce this dependence
through research to come up with appropriate technologies for LDC needs.
Modifying the direct linkage between education and employment.
Many of the necessary skills for development tend to be neglected .by the education
systems in most LDCs. Many educational systems prepare students to function in a
small modern sector which employs a very small proportion of the labour, force. The
creation of attractive economic opportunities in the rural areas may solve the problem by
redirecting educational systems towards the needs of rural development.
5. Reduce population growth rates.
This is important because it would reduce the size and growth of the new labour force
especially in urban areas. However, it may not be of help now because for the next 15 to
25 years the size of the labour force has already been determined by existing fertility
rates especially in Kenya. This however, does not negate the need to lower fertility rates
as soon as possible especially in heavily populated LDCs.
The countryside surrounding urban areas is one of the most critical areas of human
settlement. Within it are resources vital for human society both for present and future
generations. The countryside therefore has a special relationship with urban areas. These
two areas are interdependent and serve each other in several ways.
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7.5 RELATIONSHIP BETWEEN RURAL AND URBAN AREAS
What you find is that in the countryside, agricultural development has fostered the
development of many small service centres whose prime function is to provide goods and
services. But whatever the exact relationship between the countryside and the city, and
whether the countryside's main function is providing food or a place to live in, the city
and the countryside are integral parts of the same social and economic systems. Thus
changes in the city and the countryside are interdependent.
Agriculture represents perhaps the most basic activity carried on within the countryside
in terms of the human life - support system. The higher incomes associated with the
concentrated urban markets produce' demands for certain goods produced in the •
countryside mainly agricultural crops, so the very existence of city life can be viewed as
being dependent upon agriculture. The development of agriculture to a point where it is
no longer a subsistence activity provides a surplus to support urban populations and at the
same time releases a large proportion of the human labour force from having to engage in
food -production and make them available for non-agricultural employment.
Agricultural development has therefore be-en viewed as being an essential ingredient for
the urban revolution.
Urbanization can be seen as producing three sets of demands. These are demand related
to increasing employment opportunities in urban areas, increasing market opportunities
and increasing demands for land for urban development. First urbanization has been
associated with growing employment opportunities in urban areas. The attractions of
urban employment have resulted in rural depopulation in a number of countries and have
therefore encouraged capital substitution for labour in agriculture.
Second some urban regions constitute very significant market concentrations which
cannot fail to exert some influence in the surrounding agricultural areas. Market
proximity thus conveys certain advantages to local producers.
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ACTIVITY 1
1. Can you write down several ways through which urban and rural areas serve each
other?

Finally, urbanization produces a demand for land for urban development of various kinds.
This may lead to loss of agricultural land especially the higher quality land. The process
of urbanization therefore can affect both positive and negative impacts on an urban area’s
hinterland.
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7.6 Summary
This lesson has dealt with two main subjects. The first subject was rural - urban
migration and the second was rural - urban economic relationship. The rural urban
migration section has examined the economic effects of migration on both rural and
urban areas of LDCs. It has also given a brief discussion of migrant characteristics. The
section also discussed the Todaro migration model. From the model we note that
expected incomes are defined in terms of both wages and employment opportunities and
therefore it is possible to have continued .migration in spite of the existence of sizeable
rates of urban unemployment if migrants expect to acquire high paying jobs in urban
areas. We can therefore say that rural - urban migration will continue so long as the
expected urban real income exceeds the real agricultural income. The section ends by
suggesting policies that LDC governments may pursue in an attempt to curb this
problem.
On the subject of rural - urban economic relationship we have seen that urbanization can
create a market for non-farm job opportunities which can attract agricultural labour.
Simultaneously the subsequent labour shortage that thiscreates encourages the move
towards a more capital intensive type of farm structure. Similarly large markets for
agricultural produce further encourage agricultural inputs. These are then sold to
farmers in the rural areas. These are inputs like agricultural implements, seeds etc.
Training institutions in urban areas also provide agriculture with trained, manpower.
These are people like agricultural extension workers who , advise farmers on the best
methods of farming. Other trained personnel may also be trained in urban areas and go
to start small — scale industries in the rural areas. Most urban areas also act as points
for handling produce from the agricultural sector for export or for local sale. Thus
urban areas act as outlets for agricultural produce.

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Activity 2
Read the section on rural-urban migration and try to answer the following
questions.
Activity one gives you a question to answer on the section on rural-urban
economic relationship.
1. Do you think rural-urban migration is a
problem affecting Kenya today?
2. How does rural-urban migration affect
Kenya's .rural and urban areas?
3. What are the factors encouraging people in Kenya
to-
move to urban centres?
4. What do you think the Kenyan government
can do to curb the problem of migration?
7.7 Further Reading
1. Todaro, M.P. Economic Development in the Third World, Second Edition, Longman,
1981.
2. Barnum, H.N. and Sabot R.H.Migration, Education and urban surplus labour,
OECD Development Centre Employment Series Monograph.,
Oct. 1975 (Mimeo)
3. Bryant, C.R et.al. The city'scountryside; Land and its management in
rural urban fringe, Longman, 1982.

LESSON 8
URBAN LAND USE
8.0 INTRODUCTION
In lesson 4, competition for scarce local inputs was identified as one of the factors
limiting spatial concentration and favouring the dispersal of activities. This lesson first
discusses the importance of land in urban economics. The lesson will also explore the
question of how various uses are alloted their shares of city land and where in the city
they locate. It will also discuss briefly how the ownership of land can result into
inequalities in incomes among different groups of people in society.
8.2 The Importance of Land in Urban Areas
Every human activity whether to be located in urban areas or rural areas requires some
land. In urban areas land can be used for various purposes.
Apart from being used for putting up industries and other buildings, it is also needed for
such purposes as the storage of industrial materials and finished products. Land is also
important in that it is needed for the expansion of industries and even residential areas. In
other words land is a very important factor of production in that all activities require it.
The qualities of land include such attributes as the topographic, agricultural, mineral
properties of the site, the climate, the availability of clean air and water and finally a host
of immediate environmental characteristics such as privacy, aesthetic appearance etc. All
Page 58 of 73
At the end of this lesson, you should be able to:
1. Discuss the significance of land in urban economics;
2. Describe how land is allocated to the various uses in urban areas;
3. Explain how inequalities in incomes result due to the ownership of land.

these things plus the availability of such local inputs as labour supply and community
services, the accessibility of markets etc enter into the judgement of whether a particular
site is worth any specific use.
8.3 Competition for the use of Land
It is important to note that in an increasingly populous and urban economy more and
more of what were initially the free gifts of nature (such as water, air and privacy) are
assuming the character of scarce local resources and this Strains theconcentration of
activities.
Most land can be utilized by any of several activities. Even an uninhabitable and
impassable swamp may have to be allocated between the competing claims of those who
want to drain or fill it and those who want to preserve it as a wet land wild life sanctuary.
So the normal multiplicity of possible uses means that in considering spatial patterns of
land use-, we can no longer think in terms of the individual location unit or of one
specific activity but must move up to another level of analysis that of the multiactivity
area or region.
Competition for land plays an important locational rule in areas where activities tend to
concentrate for any reason. Locations having good soil, climate and access to other areas
and areas suitable for agglomeration are always in great demand.
The price of land is our best treasure of intensity of demand and competition for land
varies with quality and access and rises abruptly to high peaks in the urban areas. In
societies in which land use is governed through a price system, the price of using land is
identified as rent and in principle each parcel of land goes to the highest bidder. There are
countless reasons why an individual firm or institution will pay more for one. site than
for another. A site may be .highly desirable because of 'its 'mineral resources, soil quality,
water supply, climate, topography, agreeable surroundings, good input-output access
(that is access from input sources and to markets), supply of labour, supply of public
services, prestige and so on.
Owners of land will if they want to maximize their economic welfare see to it that the
land goes to that activity and specific occupant (firm, household, public agency or other)
that will pay a higher rent than any other. At the same time occupants will ideally
compare different sites on the basis of how much rent they could afford to pay for each if
it were utilized in the most efficient way available to them, and will look for the site
where the rent they could afford to pay exceeds by the largest possible margin what is
charged.
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Land markets are not so perfect in their allocation and sometimes land owners or users
don't have devotion to the profit motive. Because of this, socialist countries initially
nationalized all land am, attempted to assign it without using any system of market prices
or imputed prices.
A retreat from this position has been in evidence in recent years in some countries e.g.
Yugoslavia with competitive market forces being given an increasing role in land-use
allocation, though severe constraints prevail as to the amount of land any one individual
may own.
Another thing to note about the theory of land use is that it places a lot of emphasis on
access to markets than other inputs. One may well ask at this point why the theory of
land use places so much stress on access to -markets. Why not access to the sources of
transferable inputs?
On the urban scene, the greatest land using activity is residence and the orientation of
residences is mainly toward markets far labour services; that is, towards employment
locations. So high densities of urban population occur almost exclusively in areas close
to major job concentrations. The various business and government activities of an urban
area, in so far as they serve the local market are sharply market oriented because their
transferable outputs are so much more perishable and valuable than their transferable
inputs.
8.4 Inequalities Resulting From the Ownership of Land
A situation quite apparent in majority of less developed countries is the unequal nature in
which land is owned. A few large land owners own the bulk of the land and have been
able to subvert any efforts ,to achieve -land reform. This has led to inequalities in land
ownership and also to inequalities in incomes among different groups of people in
society since land generates income when put into productive use. The adverse effects of
this concentration of ownership would be far less if the owners were ready for any land
reform. But they have generally been either inert in the face of such opportunities or
convinced that their long-term interests are better servedby blocking any changes that
might follow a breakup of the c feudal order in which they attained their positions.
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8.5 Summary
This lesson has first discussed the importance of land in the location of activities in urban
areas. Land is a very important factor of production. Apart from being used to put up
urban structures it is also used for expansion purposes. The lesson has also mentioned
that with increasing urban population, land is getting scarce and therefore becoming too
competitive; to acquire. The lesson has also brought out another aspect which is quite
noticeable in majority of less developed countries. This is the unequal distribution of
land not only in urban areas but also in rural areas. This ownership of land brings
unequal earnings among different groups of people in society and therefore a skewed
distribution of income.
8.6 FURTHER READING
1. Jack Rose, The Dynamics of Urban Property
Development,
E. and F.N.Spon, New York, 1985.
2. David Segal , Urban Economics, Richard D. Irwin Inc, 1977.
3. Hoover, E.M. and Giarratani., F AnIntroduction to Regional Economics, Third Ed,
Alfred A. Knoff, New York, 1984.

LESSON 9
ECONOMIC EXTERNALITIES OF URBAN CONCENTRATION
9.0 INTRODUCTION
Large urban concentrations are as a result of rapid population growth which is partly
caused by the natural rate of increase and partly by the rural-urban migration based upon
demands for industrial jobs and upon real or imagined social and economic benefits
attainable in urban areas.
Urban concentration leads to the enjoyment of cheaper and more flexible transportation
and utility systems, better research and development facilities, a more skilled and varied
labour supply, better faciliti.es for educating and retraining workers and a wide variety of
employment opportunities in commerce, administration, transport and manufacturing.
Concentration leads to employers benefitting from the diversity of legal, technical and
advertising facilities available in urban areas. More to that resident have access to a
generous range of shops including highly specialized retailers and wholesale shops; thus
there is usually a choice of several good schools, variety of shop and well equipped and
well-staffed hospitals. Added to these benefits of urban coefficient, ration there are also
effects of urban concentration. These will be discussed in this lesson.
9.2 MEANING OF EXTERNALITIES
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At the end of this lesson you should be able to:
Explain what externalities are;
Discuss the positive externalities of urban concentration
Discuss the negative externalities of urban concentration

Externalities can simply be defined as the impacts of the activities of households, public
agencies or enterprises upon the activities of other households, public agencies or
enterprises. Externalities can either be positive or negative. It is essential to note that the
very essence of a region is interdependence of activities and interests and these
interactions become particularly crucial in a high-density urban region within a city 017
neighbourhood. Any change in one activity produces externalities or neighbourhood
effects on a variety of other activities and these effects can be either helpful or harmful.
Thus the building of a sports stadium can help the tenants of an area by bringing in more
visitors and purchasing power, while at the same time it can spoil the surrounding
residential neighbourhood by creating traffic congestion, noise and litter.
An important task for urban economists is to deviseways, of. "internalizing" the
externalities involved in regional change. Take foe example, a chemical plant whose
operations pollute a river. The pollution imposes a variety of injurious externalities on
other residents of the area. Thus, other industrial plants and water supply systems
downstream will have to incur extra costs to treat water for use. Businesses based on
recreational use of the river or fishing will suffer diminished patronage, higher costs or
both and there will Still be broader injury to the community in terms of loss of
recreational opportunity and amenity and possible health hazards. In principle, it
might be possible to set a fee or tax on- the chemical plant to reflect all these social
costs. The costs of pollution would thus become internal costs of the chemical firm.
These costs will then have been properly internalized or placed where they belong
(that is, imposed on the party that causes them). In a situation like this the chemical
firm can either:
1) Choose a different location altogether or;
2) invest some money on effluent treatment to reduce or eliminate the pollutant and thus
get relief from the-special tax or
3) Continue the pollution and pay the tax, where upon the community gets the money to
use for downstream water treatment or for compensating in some way the various
parties injured by the pollution.
We can also speak of internalization in the opposite case in which some individual
activity yields external benefits to other parties. Internalization of the social benefits will
then be in the general interest.. This is the rationale for the granting of various forms of
subsidies, inducements and exemptions to activities that are believed to have beneficial
external effects. Thus a chamber of commerce of a neighbourhood merchants'
association may raise money from its members to help build a convention hall, park or
other facility that they believe will eventually help their business; or a municipality of 'a
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state may use general tax funds to subsidize new industries or give them tax exemptions
on the theory .that such subsidy is a sound investment for the tax payers as a group.
9.3 Positive externalities of urban Concentration
1. The Potential size of the local market
This is a market enlargement externality. Large concentrations of population and
industry create marketing economics. As thepopulation of an urban area increases, it
creates greater demands for products and this in turn increases the potential market for
locally based firms and businesses. Concentration also helps to reduce actual marketing
costs since information about various products tends to flow easily within an area. A
large local market can also reduce actual production cost as it enables a higher degree of
specialization. By the growth of an urban concentration a producer is assured of
sufficient market for his goods to enable him to employ bigger and more efficient pieces
of machinery and to introduce more productive and automated' techniques into his
factories and this can cut production costs substantially.
2 Availability of basic services
Large urban concentrations offer a wide range of facilities such as recreational, social
and educational facilities. It is important to note that there is need and requirement of a
minimum threshhold of population for efficient provision of public services. In most
cases only the largest urban areas are served by airport facilities and there is also a
minimum size needed before mainline railway services are provided.
3 . Growth of Inter-related industries
The establishment of a particular industry in a particular location tends to encourage the
establishment of complementary industries. For instance in the commercial centres the
main financial institutions have .been supplemented by the growth of complementary
legal and insurance facilities. More to that the availability of spare parts in such centres
facilitates the growth of new industries and this further leads to the growth of other
satellite towns,
4 . Labour availability
With urban concentration a pool of skilled labour tends to accumulate. This labour
may possess important managerial and entrepreneurial talents. Firms in one urban
area will therefore benefit from this labour.
5 . Greater incentives for innovation
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A large number of firms producing similar goods in an urban concentration will
Motivate competition which in turn encourages innovation.
9.4 Negative externalities of urban concentration.
So far we have dealt with the beneficial aspects of urban concentration; but in real
life economist have found that positive externalities increase rapidly as an urban area
grows but beyond a certain point there sets in negative externalities. Before we turn
onto the negative of urban concentration think of the following question.
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ACTIVITY 1
What do you think are some of the harmful effects of urban concentration?
As an urban area grows it exerts negative effects onto the surrounding areas. These
effects are discussed below.
1. High Prices of land.
As the scale of urban area increases land prices and housing costs rise. There arises need
to build higher structures to economise on space in many, parts of the concentration. The
cost of living in the urban areas also increases. This has been termed as a deglomerative
factor and explains the growth of smaller towns outside the main urban area.
2. Problems of labour costs
The problem of providing social, health, recreational and housing facilities for the labour
force becomes critical. The provision of these servicesis more expensive in urban
concentrations than in other areas.

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3. Population
This can be air pollution, water pollution noise pollution and waste disposal. Air pollution
is excessive due to excessive concentration of polluting gases and dust from industries
and house heating systems as well as exhaust pollutions from road traffic. Some air
pollutions are too dangerous as they consist of fumes and heavy dark soots that lead to the
deterioration of housing while others lead to the irritation of the nose, throat and lungs as
is experienced in highly industrialized countries. The cost of trying to control this air
pollution becomes too high to an urban concentration.
Effects of water pollution are more obvious in an urban concentration where seas, lakes
and rivers are polluted largely as a result of emptying into them industrial and
agricultural waste as well as domestic waste. A good example is in America where lake
Erie has become a big public sink.
Water and air pollution are big costs to factories seeking to control them. Most factories
recirculate the water they use for processing which will reduce the percentage of
pollution.
Another thing to note is that as the urban concentration grows problems of rubbish
collection increase. This leads to the piling of rubbish in many areas. This becomes a
diseconomy because it even becomes hard to rid the environment of its most toxic gases.
4. Effects of rural-urban migration
Migrants create costs to others which they - do not have to bear themselves. Having
moved from the rural areas to get jobs in the expanding urban areas they find
themselves having no income especially if they don't get jobs immediately. They
therefore act as free-riders on the social amenities in the urban concentrations.
5. Congestion
Excessive population causes congestion to the facilities of urban areas especially
space. The common one here is traffic congestion on the roads, and road side
walks and parking problems. Where traffic congestion is heavy the journey
between residence and work place is often uncomfortably long and during the
rush hours it is even frustrating due to increased travel time.

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9.5 SUMMARY
This lesson has introduced you to externalities or those neigbourhood effects that an
urban area will exert on other neighbouring regions as it grows. We mentioned in
the lesson that there are both posit.ive and negative externalities. The positive
effects expand and increase rapidly as an urban area grows but beyond a certain
point the additional gains diminish rapidly and negative effects set in.
9.6 FURTHER READING
1. Harvey Sparloff Issues in Urban Economics, John Hopkins Press Ltd., 1968.
2. Hoover, E.M. and Giarratani, F.An Introduction to Regional Economics,
Third Ed. Alfred A. Knoff, New York, 1984.
3. Goerge Beier and Anthony Churchill,The task ahead for cities in developing
countries, World bank staff working paper No- 209, July, 1973.

LESSON 10
THE BASIS OF PLANNING IN URBAN AREAS
10.0 INTRODUCTION
Planning, whether done at the household or national level is important in that it helps in
the achievement of certain predetermined goals. In this lesson we 'shall discuss what
planning itself is. The significance of urban planning will also be discussed. The lesson
will also touch on the characteristics of a good plan. Finally, the problems which hinder
plan implementation and how they can be overcome will be discussed.
10.2 The content of urban planning
The placing of urban planning in its context involves asking certain very basic questions.
Why in fact is there a need to-plan at all? What 'is planning and how does urban planning
fit in? Why is there a need for urban planning and what form does it take?
10.3 What Planning is and why do we Have to plan?
Planning has been going on throughout history and it is tempting to explain it by
merely stating that man has a natural urge to plan, thus it is part of his organizational
make up. This could be the psychologist’s approach, setting planning up as one of the
Page 68 of 73
At the end of this lesson-.you should be able to:
(a) Explain what planning is;
(b) Discuss the significance of urban planning;
(c) Describe the essential characteristics of a good plan and;
(d) Discuss the problems which hinder plan implementation and how they can be
overcome;

basic social drives of society – a drive which is not biologically in both but which is
learned in society, and upon the satisfaction of which rests the survival of society.
Planning has been on the increase over the last 100 years. But why this increase in
planning? It has been demonstrated over time that the normal interplay of private action
and market forces often results in situations which the nation is not willing to tolerate and
which can only be improved by means of a control mechanism planning. The limited
provision of Public goods such as open space and fresh air, the wastes of competition, the
problems of economic instability in particular the problem of unemployment, the rapid
rise in population especially urban population have all increased the need for planning;
but what is this control mechanism called planning?
Planning is primarily a way of thinking about social and economic problems. Planning is
oriented predominantly towards the future. It is a deliberate governmental attempt to
coordinate economic decision making over the long run. Governments plan in order to
influence, direct and even control the level and growth of a nation’s principle economic
variables. These variables include income, consumption, employment, investments and
savings. All this is done in order to achieve a predetermined set of development
objectives.
Planning is therefore the exercise of fair thought in an attempt to select the best policies
to be implemented for the development of the national economy. Thus it is a means of
securing coordination among the various policy instruments the government will employ
at any given time.
Planning may have single or multiple goals and objectives. A local authority may plan to
build a new road to improve internal accessibility, but also to attract new firms and to
widen its shopping hinterland-Similarly an individual may plan to build an extension to
his house to accommodate his growing family and gain more privacy from his
neighbours.
Page 69 of 73
What is planning?

All planning involves a sequential process which can
be conceptualised into a number of stages such as:
1. The identification of the problems
2. The formulation of general goals and more specific and measurable objectives
relating to the problem ;
3. the identification of possible constraints ;
4. he projection of the future situation ;
5. the generation and evaluation of alternative courses of action; and
6. the production of a preferred plan which may include any policy statement or strategy
of achieving the goals of the plan.
This process is relevant to the whole spectrum of planning problems. From the above
stages, we note that the planning process can be described as an exercise in which a
government first chooses national objectives. The government then sets various targets
and finally organizes a frame work for implementing, coordinating and monitoring the
plan.
Urban Planning
This is the planning of an urban area. It is the process of formulating and clarifying
socio-economic objectives and the ordering of activities in an urban space. In other
words, it can be seen as an attempt to guide the development of an urban centre.
Urban planning usually involves both physical and economic planning. Physical
planning is the planning of an areas physical structure - such as land use,
communications, utilities etc. Economic planning is concerned more with the economic
structure of an area and its overall level of prosperity.
Before you proceed with the lesson, stop for a while and think of. the following,
question.
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Pressure for governmental action for the urban area may come from a variety of sources.
So urban planning can be seen as a response to certain pressing .Urban issues. Some of
the dominant urban issues necessitating the need for planning are rapid population
growth, increasing urbanization and increasing personal mobility. So the problem of
congested urban regions has resulted in urban planning that has been largely physical or
environmental in nature. In essence it is a land use planning approach with the aim of
improving living conditions and creating a better environment.
In addition urban planning can also be seen as a supportive devise for national and local
planning. There is now agreement that overall national planning should take into account
the problem of the urban allocation of resources. Further, urban information is
a major element in the formulation of national plans and
policies.
So far, we have said that it is worthwhile to plan if we have to achieve certain social and
economic objectives. The question, to ask at this time is what constitutes a good plan?
Orin other words, what are the characteristics of a good plan? This question is important
because if a plan is not good, then it may not achieve its objectives.
10.4 The essential characteristics of a good plan
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Activity 1
(a) What do you think necessitates urban planning?

A good plan will be .comprehensive in the sense of including the private sector, the
public sector end all other sectors in theeconomy or area in question. This is important
because in a mixed economy like Kenya where most production is in private hands, there
may not be any meaningful sense in planning the future development of the economy
unless that plan in some way includes private activities.
A well prepared plan will also include a review of the past performance of the economy
or region in question as well as an identification of 'the most serious current problems.
There is not much chance of improving the future performance unless we understand the
forces that have held us back in the past. We should therefore have a precise conception
of the nature of the problems to be overcome.
A good plan should define the government's objectives with as much precision as
possible, and establish priorities .between them, it is only when that is done that we can
hope to choose the best policies with which to achieve the objectives.
Even though a plan may be comprehensive, what it has to say about the government's
own spending intentions will set particularly important. Thus, a well prepared plan will
set out programmes of government capital spending for the plan period which should also
be broken down into specific projects. The programmes should also reflect the priorities
and strategy announced in the plan.
10.5 Problems which hinder plan implementation and how they can be overcome
Plans may be too ambitious. This means that the plans try to accomplish too many
objectives within a short period or with inadequate resources. In a case like this, the
plans will contain targets that are unachievable. This problem can be solved by
surveying the resources available so that the plans can be based on realistic targets.
There can also be unexpected economic disturbances. Whether internal or external-such
disturbances are difficult to accommodate in the planning process and this can lead to
plan failure.
Another problem is that of poor coordination between the many agencies involved in the
preparation of plans. There is therefore need for coordination if plans are to succeed.
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10.7 FURTHER READINGS
Hoover, E.M. and Giarratani F. An Introduction to Regional Economics, 3rd
, Ed. Alfred
A. Knoff, New Yori, 1984.
John Hutton, Urban Challenge in East Africa, East Africa Publishing house, Nairobi,
1972.
Mabogunje A.L. The Development Process – A Spatial Perspective, Hutchinson, 2nd
Ed.
1981
Balchin P.N. and Kieve J.L. Urban Land Economics, 3rd
Ed., Macmillan, 1985.
Grahan Hallet, Urban Land Economics, Principles and Policy, Macmillan,1979.
Bryant C.R., Russworm L. N. Mclellan A.G.; The city’s countryside; Land and its
Management in the rural urban – Fringe, Longman 1982.
Todaro, M.P. Economic Development in the Third World, 2nd
Ed., Longman, 1981.
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10.6 SUMMARY
This lesson has defined what planning is. It has pointed out that planning is a way of
thinking about social and economic problems and is oriented mainly towards the future.
It was pointed out in the lesson that urban planning is very important and that its
purpose is to guide the development of urban centres. Urban planning therefore deals
particularly with matters such as the movement and distribution of population,
employment and provision of major recreational facilities and communications
network.
The lesson also discussed the essential characteristics of a good plan and mentioned that
plans have their own weaknesses so that what is planned might not always be achieved.
It is therefore the duty of urban authorities to make sure that they minimise these plan
failures] as much as possible.

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