This document discusses urbanization trends globally and examines why some countries have undergone rapid urbanization without corresponding increases in GDP per capita. It notes that while cities were historically symbols of wealth and power, many of today's largest megacities have emerged in developing countries without significant economic growth. Maps and data from the UN show urban growth rates over 3% concentrated in Asia and Africa since 1990. The top contributors to projected urban population increases by 2050 will be China, India, Nigeria and other developing nations across a wide range of income levels. This suggests urbanization has become decoupled from national wealth, with potential risks for poor megacities lacking strong institutions.

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Michelle B. Dold
I n t e r n a t i o n a l D e v e l o p m e n t S t u d i e s 1 9 1
D e c e m b e r 2 0 1 4
Urbanization Without Economic
Development: Causes and Crises

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Urbanization Without Economic Development: Causes and Crises
I. Introduction
Since the dawn of civilization, large settlements have been synonymous with
advancement- beacons of a society’s prosperity and symbols of its power and influence.
The greatest cities in history have inspired legends, etched into the collective memory of
the human population: Jericho, Babylon, Carthage, Rome, Baghdad, Beijing, London-
each the center of a booming empire characterized by technological innovation and living
standards extraordinary for their time and cradles of some of the greatest achievements in
human history. Beginning in 2008, for the first time in demographic history more than
50% of the world population lived in urban areas, a trend that demographers predict will
continue for decades to come. Not only is our world becoming increasingly urban, but the
process of urbanization itself has transformed in recent history as the benefits and
repercussions of globalization diffuse across the globe. Though whereas historically the
world’s wealthiest nations have played host to its largest cities, many megacities of today
have sprung up in some of the world’s least developed countries, oftentimes absent
significant economic growth. In recognizing such profound shifts occurring in
urbanization patterns globally, I seek to examine, first, possible mechanisms behind these
changes and, second, how such changes impact or should impact policy making in these
places. Three central questions provide a framework for the research that follows: Why
have some countries undergone rapid urbanization without increases to GDP per capita?
What are the dangers associated with this brand of urbanization? Should these
governments implement policies to slow down the pace of urbanization? Governments in
poor, rapidly urbanizing countries face unique challenges in administering enormous

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cities without sufficient financing to do so effectively often resulting in disastrous
consequences for the urban poor. Some developing countries have undergone rapid
urbanization absent significant increases in national wealth as the global agricultural
system creates widespread impoverishment of their rural populations. When these
countries lack strong political and economic institutions, they fail to take advantage of the
benefits of urban agglomeration, falling prey to the negative externalities of extreme
population density.
II. Characterizing Modern Urbanization
The world population has undergone profound demographic shifts in the past half
century due, in large part, to changing trends in urbanization across the globe. While
recent increases in the scale of urbanization are impressive- megacities like Mexico City,
Shanghai, and Delhi have populations of 20 million, 23 million, and 25 million
respectively- the most striking shift, perhaps, has been the changing geography of
globalization. The map below (Figure 1) of growth rates of urban agglomerations from
1970-1990 demonstrates that already at this point in demographic history most of the
highest urban growth rates of 3% or more annually, illustrated by orange and red dots,
were concentrated in the global south- especially in regions such as Central America,
Western Africa, the Middle East, and Southeast Asia. Moderate growth, however, was
still occurring throughout much of North America, Europe, and Australia. Boxes on the
map represent megacities, somewhat arbitrarily defined by the United Nations as urban
agglomerations of ten million or more residents, which are scattered across the globe.
Figure 2 depicts urban growth rates from 1990 to 2014, showing that urban growth has
slowed to under 1% in most North American agglomerations and across most of the

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European continent. During this period, high growth rates of 3% or more were
concentrated almost exclusively in Asia and Africa, a trend that demographers predict
will continue in coming decades.
Figure
1:
Growth
Rates
of
Urban
Agglomerations,
1970-­‐1990
[United
Nations
World
Urbanization
Prospects:
2014
Revision]
Figure
2:
Growth
Rates
of
Urban
Agglomerations,
1990-­‐2000
[United
Nations
World
Urbanization
Prospects:
2014
Revision]
City Population
500 - 750 thousand
750 - 1000 thousand
1-5 million
5-10 million
10 million or more
Growth Rate
× <1%
× 1-3%
× 3-5%
× 5% +
Note: Designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on
the part of the Secretariat of the United Nations concerning the legal status of any country, territory or area, or of its authorities,
or concerning the delimitation of its frontiers or boundaries.
City Population
500 - 750 thousand
750 - 1000 thousand
1-5 million
5-10 million
10 million or more
Growth Rate
× <1%
× 1-3%
× 3-5%
× 5% +
Note: Designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on
the part of the Secretariat of the United Nations concerning the legal status of any country, territory or area, or of its authorities,
or concerning the delimitation of its frontiers or boundaries.

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The following graph (Figure 3) from the United Nations’ World Urbanization
Prospects 2014 Revision illuminates in more detail what can be gleaned from the maps
above: that the greatest contributors to growth in the urban population in the coming
decades will be from Asia and Africa, especially from exceptionally rapidly urbanizing
countries such as China, India, Nigeria, and Indonesia. Excluding the United States,
North American and European countries are notably missing from the list. Perhaps the
most striking takeaway from
the graphic is that the greatest
contributors to urban growth
will be from a massive range
of income brackets- from the
US with a 2013 per capita
income of $53,143 to Nigeria
with a GDP per capita of
$3,006 to the Democratic
Republic of the Congo, whose
average income was just $454
in 2013 (World Bank). The
graphs below (Figures 4 and 5) further substantiate this notion of a loosening correlation
between a nation’s wealth and its level of urbanization. One can observe the relationship
between percentage urban on the y-axis and purchasing power parity-adjusted income per
capita on the x-axis transform from a somewhat tight positive linear pattern, suggesting
that richer countries tended to be more urban in 1960, to a more cloud-like shape,
World Urbanization Prospects: The 2014 Revision12
Just a few countries are home to half of the world’s urban population. China has
the largest urban population (758 million), followed by India (410 million). These two
countries account for 30 per cent of the world’s urban population and, with another five
countries, the United States of America (263 million), Brazil (173 million), Indonesia (134
million), Japan (118 million) and the Russian Federation (105 million), account for more
than half of the world’s urban population.
Future increases in the world’s urban population are also expected to be highly con-
centrated in just a few countries (figure 7). Taken together, China, India and Nigeria are
projected to account for 37 per cent of the increase of nearly 2.5 billion people in the urban
population by 2050. Between 2014 and 2050, the urban areas are expected to grow by 404
million people in India, 292 million in China and 212 million in Nigeria. Seven other
countries, the Democratic Republic of Congo, Ethiopia, the United Republic of Tanzania,
Bangladesh, Indonesia and Pakistan, and the United States of America, are projected to
contribute more than 50 million each to the urban increment and will constitute together
another 20 per cent of the total increase in urban population. In a few countries, the urban
population will decrease, despite projected increases in the level of urbanization. The larg-
est declines between 2014 and 2050 are projected for Japan, with a decline of 12 million
urban dwellers and for the Russian Federation, expected to decline by 7 million.
Figure 7.
Contribution to the increase in urban population by country, 2014 to 2050
China and India will
contribute more than
one third of the global
urban population
increase between 2014
and 2050
Note: The countries shown are projected to contribute 25 million or more to the global urban increment
between 2014 and 2050. The category “Other countries” includes countries with urban increments
of less than 25 million each.
0
500
1000
1500
2000
2500
Other countries
Democratic Republic of the Congo
China
India
nearly 2.5 billion
urban population increase
by 2050
50%
Nigeria
Indonesia
United States of America
Pakistan
Urbanpopulationincrease(millions)
Iraq
Angola
Viet Nam
Sudan
Iran (Islamic Republic of)
Uganda
Kenya
Egypt
Mexico
Brazil
Philippines
Ethiopia
United Republic of Tanzania
Bangladesh
Figure
3:
Contribution
to
the
Increase
in
Urban
Population
by
Country,
2014-­‐2050
[United
Nations
World
Urbanization
Prospects:
2014
Revision]

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suggesting that by 2011 wealth was no longer a requisite nor a guaranteed outcome of
urbanization. Osaka, Japan, for example, one of the wealthiest megacities, is projected to
fall from its former place as second largest city in 1990 to the thirteenth largest city in
2030, whereas demographers predict that Lagos, Nigeria will grow to become the ninth
largest city in 2030 from its position as thirty-third in 1990 (United Nations). As the
association between urbanization and average income slackens, lower living standards in
emerging poor megacities are inciting debate within academia and popular discourse over
whether governments should adopt policies that encourage or abate urbanization in their
countries.
Figure
4:
GDP
per
Capita
vs.
Urban
Population
(%
of
Total),
1960
[Gapminder
World]

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Figure
5:
GDP
per
Capita
vs.
Urban
Population
(%
of
Total),
2011
[Gapminder
World]
III. Positive and Negative Externalities of Urbanization
The process of absorbing rural migrants into cities includes both positive and
negative externalities, which in economics are defined as “situations in which the private
costs or benefits to the producers or purchasers of a good or service differs from the total
social costs or benefits entailed in its production and consumption” (Johnson). There are
well-known and well-researched benefits to urbanization, especially with regards to
industry, as a concentration of economic agents tends to increase productivity via
agglomeration economies. In the 1960s, urban planner Jane Jacobs characterized cities as
incubators of innovation and knowledge spillovers resulting from the collision of many
people with diverse educational backgrounds and skillsets (Rigby). However, a focus on
these assumed benefits of urbanization, sometimes referred to in the literature as the

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“density cult” (Kotkin), are actually part of a problem that diverts attention away from
what is really happening in some of the world’s poorest megacities- widespread suffering
and inequality.
The negative externalities of rapid and intense urbanization abound and can result
in lower living standards in large cities when governments are ill equipped to mitigate
them. One such negative externality is the widespread unemployment of rural migrants
lacking in education or skills outside of agriculture; many of these migrants end up
working in the informal sector doing jobs like peddling small goods or driving rickshaws,
untaxed income that does not contribute to national wealth. Understandably, larger
populations means more stress on public services such as education and health care and
on infrastructure like roads and highways. One consequence of intense urbanization that
perhaps does not receive as much attention as it should is traffic congestion; one recent
survey estimated that 85% of traffic deaths worldwide take place in developing nations
(Kotkin). Additionally, pressure on a city’s housing supply can drive up prices and drive
urban poor into slums, where sanitation issues and dense inhabitance can facilitate the
spread of infectious disease. Other negative externalities such as environmental
degradation and massive income inequalities that characterize large cities in poor
countries typically take a back seat to more pressing issues of providing citizens with the
basic means of survival.

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Figure
6:
Positive
and
Negative
Externalities
of
Urbanization
None of these externalities are new per se and it is not so much their existence
that sets new global megacities apart from older ones- these dangers exist in all large
cities regardless of average income. The worry is, rather, that poorer governments often
lack the financial and institutional resources to mitigate their negative effects on the
urban population, leading to very low living standards.
IV. Glaeser’s Insight- “A World of Cities”
In order to understand the mechanisms behind these profound shifts in the
urbanization process, Harvard economist Edward Glaeser points to recent increases in
globalization, especially over the past half century. While no all encompassing or agreed
upon definition of globalization exists because of the phenomenon’s enormous scale, this

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investigation uses the term to refer to globalized supply networks of agricultural goods
coupled with liberalized trade policies. To assess the impact of globalization on growth in
cities Glaeser, in his study “A World of Cities: The Causes and Consequences of
Urbanization in Poorer Countries”, considers the links between agricultural productivity,
country size, which he uses as a proxy for openness, and urbanization in 1961 and 2010.
In their essence, his findings demonstrate that agricultural productivity was more strongly
associated with urbanization in large than small countries and that the relationship
between local agricultural productivity and city growth became less prominent during
this period (Glaeser 3-4).
Glaeser postulates that, as globalized trade networks break the traditional links
between urban areas and the agricultural hinterlands that historically sustained them,
displaced and impoverished rural populations flood cities in search of other economic
opportunities. The macroeconomics of development tend to support this theory; as
countries orient their economies toward export to international markets and away from
subsistence agriculture, typically this process involves governments and/or private
enterprises investing large sums of capital to mechanize agriculture and make it more
efficient and opening borders to international trade. Unable to compete with the lower
prices of imports, especially when agricultural prices are artificially depressed by
government subsidies in developed nations (eg. of the US to its domestic sugar industry),
small farmers are often put out of business. When this occurs, such farmers often must
sell their land, the main source of wealth and form of inheritance in most rural societies,
or government simply seizes land for commercial agriculture and impoverished rural
dwellers must look to cities for economic opportunity.

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Figure
8:
Potential
Paths
to
Urbanization-­‐
Closed
vs.
Open
Economies
Figure 8: This very simplified schematic illustrates theoretically how huge cities can develop in
poorer nations. In relatively closed economies, like those of North American and European
countries during their period of urban development, urban populations are dependent on the
surrounding rural areas for sustenance, which leads to local agricultural prosperity assuming the
country has fertile soil and a climate conducive to cultivation. Agricultural abundance means that
a city can sustain larger populations and nearby urban areas will grow gradually in that much of
the rural population will stay put given high demand, and therefore high prices, for its products.
Conversely, in economies that are more open to trade, like those of many small developing
nations today, urban areas no longer necessarily depend on local agriculture for sustenance in that
they can purchase cheap imported food from international markets. In the context of a global
system of trade in agricultural products, small scale and subsistence farming become less
financially feasible. Displaced rural dwellers flood cities in search of work.
closed economies
(dependence on
local agriculture)
local agricultural
prosperity
gradual growth in
nearby urban areas
open economies
(dependence on
global agricultural
trade)
rural
impoverishment
rapid growth in
nearby urban areas

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The danger in this, Glaeser points out, is that huge cities with massive populations
in need of service and infrastructure provision can develop in poor countries whose
political and economic institutions tend to be weaker and whose governments are less
well-equipped to handle the challenges that large-scale urbanization can bring. The core
of Glaeser’s insight centers upon poor versus rich governments’ responses to the negative
externalities of urbanization. He holds that “the ability to punish bad behavior is limited
by the institutional strength of a particular society” (Glaeser 20). When a country’s
institutions are weak, meaning they lack a well-established rule of law or property rights
and there is lots of public sector corruption, the outcome of intense urbanization is either,
as Glaeser terms it, “anarchy” or “draconian prevention” (Glaeser 4).
One example of what Glaeser would consider anarchy in the face of urbanization
comes from Dhaka, Bangladesh, which is tied with Lagos as the most rapidly
urbanization city in the world with an estimated growth rate of 3.6% from 2010-2015
(World Bank). In addition to boasting the fastest growing, but also one of the poorest
megacities, Bangladesh also has one of the most corrupt governments in the world,
ranking 145th
out of 175 countries recently surveyed by Transparency International
(Transparency International). Many urban poor in Dhaka do not have access to basic
social services that the government is constitutionally bound to offer either inexpensively
or for free. For example, a recent survey of Bangladeshi households found that 44% of
patients in public health facilities had to pay bribes for care (Manzoor 13), demonstrating
an anarchic lack of enforcement of government regulations.
At the other end of the spectrum, some poorer governments may choose to curb
negative externalities through authoritarian policies. For example, in 1958 the

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Communist Chinese government began mandating that rural migrants carry proof of
formal residence and employment in cities like Shanghai in order to receive social
services such as education or healthcare (“Migrant Workers and Their Children”). Such a
policy suggests that some poor and rapidly urbanizing countries may face a tradeoff
between economic growth and political repression should governments choose to take
that route. Such examples support the notion that there is a link between institutional
quality and development, especially in large cities.
V. Support from Acemoglu and Robinson
Research by Daron Acemoglu and James Robinson on the effects of institutional
quality on development, as articulated in their book Why Nations Fail, has become
foundational in the field of political economics. Their findings further substantiate the
hypothesis that weak institutions make large cities in poor countries more vulnerable to
the negative externalities of intense and rapid urbanization. Their thesis holds that the
density and quality of rules put in place to structure politics (the level of democracy),
economics (the extent of free markets), and society (inclusive or extractive institutions)
either foster or inhibit economic growth (Acemoglu and Robinson). The authors write
extensively about the fact that development requires investment, not just by governments,
enterprises and capitalists, but also by everyday people. This investment, however, will
only occur when people and businesses can trust in the institutional foundations of the
country to protect their property rights so that can reliably expect a return on that
investment.
Rampant corruption and bribery in the public sector greatly increase the cost of
accomplishing almost anything in a country, discouraging capitalists from starting or

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growing businesses that could potentially act as sources of national wealth or keeping
poor individuals from receiving the services that they need.
VI. Case Study- Dhaka, Bangladesh
To coalesce all of these abstract concepts, as they do not carry much significance
without application, I will zero in on one example of a rapidly urbanizing low-income
country- Bangladesh. Dhaka is the political, commercial, and industrial epicenter of the
country, its economic activity concentrated in the production of textiles, garments,
chemicals and pharmaceuticals (“Dhaka”). As noted above, Dhaka is the fastest growing
city in the world with a current population of roughly twelve million that has quadrupled
over the past 25 years, but is the world’s poorest megacity with an average annual income
of just $829 (Kotkin). The city adds 300,000 to 400,000 people annually, mostly migrants
from poor rural areas motivated by push factors of overpopulation, natural disaster and
loss of land. According to a 2008 survey by the Bangladesh Bureau of Statistics, 4.5
million rural Bangladeshis are completely landless, which has especially impoverishing
effects given that land is the main source of wealth in the countryside. Author Shahadat
Hossain notes
In this agriculture based country, land is the main means to generate
subsistence and surplus and is the most valuable asset to the rural poor.
Increased loss and fragmentation of land among the poor and increased
concentration of land among the rich, coupled with a high natural growth
rate of the population raise the number of landless and hungry. (Hossain
18)
Pull factors to Dhaka can include employment opportunities in the informal sector that do
not necessitate extended education or training and relative freedom for female workers in
the city (Hossain 18).

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Unfortunately most rural migrants to Dhaka experience very low living standards,
especially from the lack of public services available for the 3.4 million people that live in
Dhaka’s slums. Estimates show that in these informal housing communities only 65% of
households are literate, 37% of people have access to safe drinking water, and only 10%
of shelters are built from concrete, the other 90% being built from scrap metal, bamboo,
and other temporary building materials (World Bank). The majority of Dhaka’s
population lives below the official poverty line, historically measured by caloric intake,
quantifying the absolute poor as those who intake 2122 k.cal or less daily. While
nationally the percentage of people living under this threshold decreased from 47.8% to
44.5% from 1988-2000, the percentage of urbanites meeting this criterion for poverty
increased from 47.6% to 52.5% during the same period (Hossain 14).
Infrastructural degradation occurs throughout the city both because of strain from
large populations and overuse, but also because of government neglect and corruption.
For example, in 2013 one garment factory in the industrial zone of Savar, just outside
Dhaka, collapsed killing over 1,000 people and injuring countless others. Upon
inspection, the factory was found to have been constructed with “substandard materials
and in a blatant disregard for building codes” (Yardley) and factory owners have been
accused of bribing local officials for construction permits (Yardley). One report from the
investigation of the collapse even found that “10% of lawmakers in the national
parliament are owners of garment businesses in Bangladesh” (Hussein). Such anarchic
neglect of regulation and impunity on behalf of the government shows that weak
institutions particularly harm urban poor.

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As previously mentioned, the Bangladeshi government performs abysmally in
Transparency International’s annual survey of public sector corruption. In the most recent
rankings, the country came in 90th
out of 142 countries in judicial independence, 146th
out
of 187 in the human development index, 129th
out of 179 in the press freedom index, and
in the 27th
and 38th
percentiles in the rule of law and accountability categories,
respectively (Transparency International). Not only do such weak institutions increase
transaction costs and encourage capital flight, but they also keep poor from receiving
social services that the Bangladesh government is obligated to provide. For example, in
order to raise literacy rates, the government extends stipends to females pursuing
secondary education, though a survey found that 22% of these women paid illegal bribes
to enroll and 38% of program participants reported receiving less money than they were
promised (Manzoor 7). Weak regulatory institutions coupled with government impunity
have kept Dhaka from realizing the positive externalities of its rapid urbanization, leaving
the vast majority of its residents to suffer.
VII. An Intriguing Solution- Paul Romer’s Charter Cities
Another notable economist to weigh in on the issue of poor country urbanization
and institutional quality is Paul Romer, a former Stanford economist now researching at
the NYU’s Stern School of Business. Romer recognizes the same malady that bars poor
countries from utilizing urbanization for development in many cases and, in his
promotion of “charter cities”, he offers a work around for the poor institutions in these
countries. Romer proposes that governments construct new cities entirely from scratch
governed by charters that lay out regulations and enforcements mechanisms different
from those that govern the rest of the country, especially ones that encourage investment

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by emphasizing property rights (but also rules about sanitation, traffic control, service
administration, etc.). Romer compares charter cities to the Special Economic Zones that
China established during the 1980s to attract foreign capital. He holds that foreign
investors could finance construction of these cities’ infrastructure in exchange for “fee
income use from the users” (Freakonomics). These countries could then enter into written
commitments with governments known for having strong, credible institutions, like the
US or Canada for example, which could act as guarantors to ensure that these countries
do not renege on promises made in the charter. Romer insists that these charters would be
further legitimized by rural dwellers choosing, without being coerced, to move to cities.
Though in theory this sounds positive, the implementation of charter cities poses
profound problems. First is the question of why corrupt officials who benefit from the
status quo would be willing to essentially renounce control over a part or parts of their
territory. This introduces the other glaring issue of enforcing rules laid out in the charter;
the reason that these types of cities would be necessarily in the first place is that
institutions that govern the rest of the country are too weak to encourage investment, so it
is unlikely that such weak or corrupt regimes would adhere to agreements, even if third
party guarantors were involved. Additionally, though the special economic zones were
largely successful in fomenting economic growth in China, such success has not come
without a price. Protests against land acquisition have sprung up in rural China,
especially in the Guangdong province, as the zone is taking over rural areas to
accommodate foreign investors (Ismaylova). Such development also comes at the
expense of Chinese laborers who endure poor working conditions in these factories.

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While Romer’s charter city idea is riddled with logistical and perhaps ethical
complications, I included it in this discussion because it further proves that institutions
are at the heart of development. Romer recognizes what Glaeser, Acemoglu, and
Robinson do- that weak institutions can keep poor countries from benefitting from
urbanization and that development requires governments to make credible and long-term
commitments to protecting property rights and enforcing the rule of law. Though charter
cities may not be the correct avenue to development, that strong institutions are necessary
for economic growth has become widely accepted.
VIII. Conclusions
Throughout this research, it has become apparent that despite the popular notion
that large, dense cities go hand-in-hand with national wealth, urbanization in and of itself
is not necessarily beneficial for a country or a population unless paired with good
governance. Edward Glaeser notes, however, that, “The connections and social
movements that form readily in the dense confines of urban areas can ultimately be
strong enough to change and discipline government” (Glaeser 41). Just as cities can act as
incubators for innovation in industry and technology, they can also generate
agglomeration economies for political reform as people share their grievances and ideas
for change. Large populations of suffering urban poor have the potential to form
coalitions to pressure their governments into greater accountability, the only way that true
change can occur when corrupt bureaucrats benefit from the status quo of extractive
institutions. Future political, economic, and demographic research on urbanization should
keep in mind not only the objective of economic growth, but also pursuing equity
alongside development

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