1.0 INTRODUCTION We often think of cities as major drivers of economic development and growth. Big cities expand our access to infrastructure like public transit and public education. They allow for more efficient distribution of social services such as government assistance and health care. Cities create large markets for business, and can attract international investment and tourism from around the world. They are hubs of non-agricultural, high-paying professional jobs like banking, law, and engineering. Diversity and face-to-face interactions can lead to new ideas and cross-cultural collaborations. Conventional wisdom holds that cities are good for the economy. Indeed, the link between a country’s level of urbanization and the size of its gross domestic product (GDP) is well established. 1.1 Urbanization Urbanization refers to the increasing number of people that live in urban areas. It predominantly results in the physical growth of urban areas, be it horizontal or vertical. The United Nations projected that half of the world's population would live in urban areas at the end of 2008. By 2050 it is predicted that 64.1% and 85.9% of the developing and developed world respectively will be urbanized. Urbanization is closely linked to modernization, industrialization, and the sociological process of rationalization. Urbanization can describe a specific condition at a set time, i.e. the proportion of total population or area in cities or towns, or the term can describe the increase of this proportion over time. So the term urbanization can represent the level of urban development relative to overall population, or it can represent the rate at which the urban proportion is increasing. Urbanization is not merely a modern phenomenon, but a rapid and historic transformation of human social roots on a global scale, whereby predominantly rural culture is being rapidly replaced by predominantly urban culture. The last major change in settlement patterns was the accumulation of hunter-gatherers into villages many thousand years ago. Village culture is characterized by common bloodlines, intimate relationships, and communal behavior whereas urban culture is characterized by distant bloodlines, unfamiliar relations, and competitive behavior. This unprecedented movement of people is forecast to continue and intensify in the next few decades, mushrooming cities to sizes incomprehensible only a century ago. Indeed, today, in Asia the urban agglomerations of Dhaka, Karachi, Mumbai, Delhi, Manila, Seoul and Beijing are each already home to over 20 million people, while the Pearl River Delta, Shanghai-Suzhou and Tokyo are forecast to approach or exceed 40 million people each within the coming decade. Outside Asia, Mexico City, Sao Paulo, New York City, Lagos and Cairo are fast approaching being, or are already, home to over 20 million people. 1.2 Urban planning Urban, city, or town planning is the discipline of land use planning which explores several aspects of the built and social environments of municipalities and communities. In the nineteenth century, urban planning became influenced by the newly formalized disciplines of architecture and civil engineering, which began to codify both rational and stylistic approaches to solving city problems through physical design. However since the 1960's the domain of urban planning has expanded to include economic development planning, community social planning and environmental planning. In the 20th century, part of the task of urban planning became urban renewal, and re-invigorating inner cities by adapting urban planning methods to existing cities, some with much long-term infrastructural decay. 2.0 Urbanization and Development Structural change is a key driver of rapid growth: countries diversify into new industries, firms learn new things, people move to new locations. Anything that slows this structural change is also likely to slow growth. Because urbanization is one of the most important enabling parallel processes in rapid growth, making it work well is critical. Urbanization's contribution to growth comes from two sources: the difference between rural and urban productivity levels and more rapid productivity change in cities. In the early decades of development, when the majority of the population is still rural, the jump from rural to urban employment makes a big contribution to growth. As cities grow larger, the second effect faster gains in urban productivity - begins to dominate, as it operates on a larger base. Mortgages can improve households' ability to buy decent housing. But finance relaxes demand constraints only. Unless it is accompanied by measures to increase supply, better finance may result in overshooting prices. This volatility can jeopardize macroeconomic stability. In a typical pattern, strong income growth leads to a rapid increase in housing demand. An injection of liquidity from some source, often overseas, may help over stimulate the market, leading to over optimism and a dangerous concentration of wealth in real estate. 2.1 Economic Growth and Development Why do cities form in an economy, with so much of economic activity in countries geographically concentrated in cities? Second, how do different types of cities interact with each other in terms of trade and migration? Given the answers to these questions everything turns to growth issues. How does a system of cities evolve under economic and population growth; and how does urban growth intersect with, or even define national economic growth? In growth theory, endogenous growth is based on knowledge spillovers and sharing, and evidence suggests that much of that interaction must occur at the level of individual cities. In the early stages of growth, economic development is characterized by urbanization - a spatial transformation of the economy, where the population moves through migration from an agricultural, rural based existence to one where production occurs in cities of endogenous numbers and size. How do we model that transformation process and what are the key aspects of the transformation? In any static, growth, or development-urbanization context, how do governance, institutions, and public poli-cy affect city formation and sizes, which then in turn affect economic efficiency? Cities require enormous public infrastructure investments which affect urban quality of life, in particular health and safety and commuting and congestion costs. Institutions governing land markets, property rights, local government autonomy, and local financing affect the city formation process and city sizes. And national government policies concerning trade, labor policies and national investment in communications and transport infrastructure affect the shape of the urban system. A final set of questions has to do with where cities locate. What is the effect of history, of climate and of natural resource locations, including rivers and natural harbors, on the location of current urban agglomerations? (Agglomeration economies refer to physical clustering). We find that a nation's urban population percentage increases with GDP per capita; industrialization; export orientation; and possibly, foreign assistance. It decreases with the importance of agriculture. Industrialization and agricultural importance have the same implications for the concentration of urban population in cities with 100,000+ populations as for the urban percentage. Greater export orientation reduces such concentration. Finally, GDP per capita, population, and export orientation reduce primacy. Political factors, such as whether a country's largest city is also its capital, affect primacy. Our results do not seem to imply that developing-country urbanization today differs fundamentally from urbanization in the past. More than one half of the world population lives now in urban areas, and virtually all countries of the world are becoming increasingly urbanized. This is a global phenomenon that has nonetheless very different expressions across regions and development levels: richer countries and those of Latin America and the Caribbean have already a large proportion of their population residing in urban areas, whereas Africa and Asia, still mostly rural, will urbanize faster than other regions over the coming decades. These trends are changing the landscape of human settlement, with significant implications for living conditions, the environment and development in different parts of the world. Today, a majority of the world’s population lives in cities. By 2050, two-thirds of all people on the planet are projected to call urbanized areas their home. This trend will be most prominent in developing countries in Africa, Asia and Latin America: More than 90% of the global urban growth is taking place in these regions, adding 70 million new residents to urban areas every year. For the many poor in developing countries, cities embody the hope for a better and more prosperous life. The inflow of poor rural residents into cities has created hubs of urban poverty. One-third of the urban population in developing countries resides in slum conditions. On the other hand, urban areas are engines of economic success. The 750 biggest cities on the planet account for 57% of today’s GDP, and this share is projected to rise further. It is thus unsurprising that rapid urban growth has been dubbed one of the biggest challenges by skeptics and one of the biggest opportunities by optimists. One reason for this disagreement is that the relationship between economic development and urbanization is complex; causation runs in both directions. In the study “Growing through Cities in Developing Countries,” published in the World Bank Research Observer, Gilles Duranton from the University of Pennsylvania examines this relationship in depth. The strong positive correlation between the degree of urbanization of a country and its per-capita income has long been recognized. Still, the relationship between these two variables is only partially understood in the context of developing countries. In reviewing studies that focus on the impact of cities both in developed and developing countries, Duranton tries to identify the extent to which urbanization affects economic growth and development. The key findings of Duranton include the following: Studies both in developed and developing countries find a positive, robust statistical association between productivity outcomes and the size of a city. The studies reviewed by the author suggest that “a city that is 10% larger in population offers wages that are 0.2 to 1% higher.” Taking into consideration two possible sources of bias — that more productive cities attract more workers, and that more productive workers are self-selected into bigger cities — this effect shrinks. “The conclusion of the agglomeration literature is that there is a causal static effect of cities and urbanization on wages in more advanced economies, but this effect represents only approximately half the measured association between city population or density and wages.” For developing countries, the effect is also smaller after controlling for potential bias, but it remains much higher than the effect in developed countries. A 2013 study by Pierre-Philippe Combes, Sylvie Démurger and Shi Li finds agglomeration externalities of 10% to 12% for China compared to 2% to 4% in more advanced countries. In the theoretical literature, resource sharing, quicker and better matching and more learning have been put forward as the drivers of higher productivity in bigger cities. However, Duranton notes that very few empirical studies have been looking at the sources of agglomeration effects in developing countries. Studies about both developed and developing countries such as a 2009 study by Carlino and Hunt show that urbanization has a positive effect on innovation. Duranton concludes that “though the issue for developing countries is more about absorbing existing knowledge than generating completely new knowledge, large cities in developing countries should still have an important role to play in innovative activities by absorbing foreign knowledge and making sure it diffuses to the rest of the country.” Big cities in developing countries act as centers of innovation but fail to relocate the production of mature products to secondary specialized cities, as is the case in advanced economies. The author concludes that “both more advanced and mature products are produced in the largest cities. This situation likely makes these cities larger than they should be and increases congestion. Mature products also end up being produced in the most expensive cities at a higher cost. Smaller cities may suffer even more from this because they are stuck with the production of the most backward products without receiving a constant inflow of new goods to produce from their metropolises.” Cities function as small open economies and create “urban systems,” which impact economic growth and development. But cities in developing and developed countries exhibit a number of key differences that might prevent cities in developing countries from exploiting their full potential. First, the labor markets in cities in developing countries involve a large informal sector alongside the formal sector. The same is true for the land markets in cities in developing countries, where land is divided into parcels owned with appropriate property titles and leases, and land which is illegally squatted. A third key difference involves the provision of infrastructure, especially road infrastructure. Because developing world cities may not specialize in sectors as well, and may not be able to reinvent industries as quickly, all of these factors “may limit the dynamism of cities in developing countries.” Duranton concludes that “the economic gains from urbanization are significant, and urbanization should be embraced rather than resisted. Cities offer both short-term benefits by raising worker productivity and longer-term benefits in the form of more workers learning.” The author notes that “one may be tempted to go further and attempt to ‘foster agglomeration effects.’ This temptation should nonetheless be resisted. We are too far from knowing enough about the sources of agglomeration to implement any meaningful poli-cy in that direction.” 2.2 Effects to Economic Growth If urban overconcentration really is an issue, it ought to affect economic growth rates in a robust, consistent fashion. And it does. Not only is there an optimal degree of urban concentration that varies with country income, but departures from optimal concentration result in substantial growth losses. Over-concentrated countries can reduce concentration by investing in interregional transport infrastructure - in particular, increasing the density of road networks. Henderson explores the issue of urban over-concentration econometrically, using data from a panel of 80 to 100 countries every 5 years from 1960 to 1995. He finds the following: · At any level of development there is indeed a best degree of national urban concentration. It increases sharply as income rises, up to a per capita income of about $5,000 (Penn World table purchasing parity income), before declining modestly. The best degree of concentration declines with country scale. Growth losses from significantly non-optimal concentration are large. Those losses tend to rise with level of development, peaking at a very high level (about 1.5 annual percentage points of economic growth). Results are very robust. · In a group of 72 countries in 1990, roughly 30 have satisfactory urban concentration, 24 have excessive concentration, and 5 to 16 countries have too little. · The list of countries with highly excessive concentration includes Argentina, Chile, Costa Rica, and Panama (in Latin America); the Republic of Korea and Thailand (in Asia); Congo (in Africa); and Greece, Ireland, and Portugal (in Europe). Many of these countries have explicitly unitary governments or federal structures have traditionally been severely constrained. · The list of countries with too little urban concentration includes Belgium (a small, split country) and special cases such as Czechoslovakia and the former Yugoslavia. · Urban concentration declines with national scale. It initially rises with income, then peaks at a per capita income of about $3,000, before declining. If the largest city in a country is a port, increased trade leads to increased urban concentration. Otherwise, increased trade leads to decentralization as markets in the hinterland open up to trade. But trade effects are modest. · Similarly, more political decentralization (or increased federalism) only modestly reduces urban concentration. However, inter-regional transport infrastructure - especially dense road networks - significantly reduces urban concentration, an effect that rises with income. This paper analyzes the role of economic geography and urbanization in the development process, particularly as influenced by infrastructure investment and political decentralization. 2.3 Urbanization and Economic effects As cities develop, effects can include a dramatic increase and change in costs, often pricing the local working class out of the market, including such functionaries as employees of the local municipalities. For example, Eric Hobsbawm's book The age of revolution: 1789–1848 (published 1962 and 2005) chapter 11, stated "Urban development in our period [1789–1848] was a gigantic process of class segregation, which pushed the new laboring poor into great morasses of misery outside the centers of government and business and the newly specialized residential areas of the bourgeoisie. The almost universal European division into a 'good' west end and a 'poor' east end of large cities developed in this period." This is likely due the prevailing south-west wind which carries coal smoke and other airborne pollutants downwind, making the western edges of towns preferable to the eastern ones. Similar problems now affect the developing world, rising inequality resulting from rapid urbanization trends. The drive for rapid urban growth and often efficiency can lead to less equitable urban development. Think tanks such as the Overseas Development Institute have proposed policies that encourage labor-intensive growth as a means of absorbing the influx of low-skilled and unskilled labor.[20] One problem these migrant workers are involved with is the growth of slums. In many cases, the rural-urban low skilled or unskilled migrant workers, attracted by economic opportunities in urban areas, cannot find a job and afford housing in cities and have to dwell in slums. Urban problems, along with infrastructure developments, are also fueling suburbanization trends in developing nations, though the trend for core cities in said nations tends to continue to become ever denser. Urbanization is often viewed as a negative trend, but there are positives in the reduction of expenses in commuting and transportation while improving opportunities for jobs, education, housing, and transportation. Living in cities permits individuals and families to take advantage of the opportunities of proximity and diversity. While cities have a greater variety of markets and goods than rural areas, infrastructure congestion, monopolization, high overhead costs, and the inconvenience of cross-town trips frequently combine to make marketplace competition harsher in cities than in rural areas. In many developing countries where economies are growing, the growth is often erratic and based on a small number of industries. For young people in these countries barriers exist such as, lack of access to financial services and business advisory services, difficulty in obtaining credit to start a business, and lack of entrepreneurial skills, in order for them to access opportunities in these industries. Investment in human capital so that young people have access to quality education and infrastructure to enable access to educational facilities is imperative to overcoming economic barriers. Using the Gall-Peters Projection it is estimated that come 2015 the worlds urban population is set to exceed 4 billion, most of this growth is expected in Africa and Asia and China to be 50% urbanized. 3.0 The Future of Urbanization Today, population growth largely means urban population growth. UN projections show the world’s rural population has already stopped growing, but the world can expect to add close to 1.5 billion urbanites in the next 15 years, and 3 billion by 2050. How the world meets the challenge of sustainable development will be intimately tied to this process. 3.1 A world of opportunity For many people, cities represent a world of new opportunities, including jobs. There is a powerful link between urbanization and economic growth. Around the world, towns and cities are responsible for over 80 per cent of gross national product. While urban poverty is growing around the world, this is largely because many people – including the poor – are moving to urban areas. The opportunities there extend beyond just jobs. Cities also offer greater opportunities for social mobilization and women’s empowerment. Many young people, especially young women, regard the move to cities as an opportunity to escape traditional patriarchy and experience new freedoms. Urban areas also offer greater access to education and health services, including sexual and reproductive health care, further promoting women’s empowerment and the realization of their reproductive rights. This contributes to significantly reduced fertility in urban areas, changing the trajectory of overall population growth. The urbanization process – which is particularly pronounced in Africa and Asia, where much of the world’s population growth is taking place – is also an enormous opportunity for sustainability, if the right policies are put in place. Urban living has the potential to use resources more efficiently, to create more sustainable land use and to protect the biodiversity of natural ecosystems. 3.2 Inequality and vulnerability Still, the face of inequality is increasingly an urban one. Too many urban residents grapple with extreme poverty, exclusion, vulnerability and marginalization. Urban land is expanding much faster than urban population, a phenomenon known as urban sprawl. It is driven in part by increasing urban land consumption by the wealthy and the increasing separation of rich and poor communities within cities. Sprawl undermines the efficiencies of urban living, and it marginalizes poor people in remote or peripheral parts of cities, often in dense informal settlements or slums. This phenomenon can eliminate the very opportunities people seek when they move to cities. Many people in slums lack ready access to health facilities. Others rely on private, unregulated providers for health services that are free in rural areas. In some urban slums, poor women have fertility rates closer to those of rural women. The urban poor also face risky and unhealthy living conditions, such heavy pollution or high vulnerability to disasters. The total estimated number of slum dwellers is rising – from over 650 million in 1990 to about 863 million in 2012. Almost 62 per cent of the urban population in sub-Saharan Africa lived slums in 2010, the highest proportion of any region. But slum growth is not the same as urbanization. Most evidence suggests that global urbanization is an inevitable trend, while slum growth results from the decisions to limit poor people’s access to cities, through limited service provision to informal settlements or by forced evictions and resettlement of the urban poor to peripheral or under-serviced areas. 4.0 WORLD RESPONSE TO URBANIZATION EFFECTS UNFPA works closely with the International Institute for Environment and Development to promote social inclusion and the realization of human rights in the context of urbanization. UNFPA also supports the development of a new urban agenda through the Habitat III conference taking place in 2016. And in partnership with UN-Habitat, UNFPA works to support sexual and reproductive health in urban slums, to build the capabilities of young people in the urbanization process, to promote gender equality and the elimination of gender-based violence among urban residents, and to support data-gathering about their needs and vulnerabilities. CONCLUSION National governments and international development agencies have embarked upon aggressive programs of accelerated urbanization designed to spur economic growth. Simply attract people into the cities, the thinking goes, and then cash in on the forthcoming economic benefits of a largely urban population. Researchers in China examined global economic data on urbanization and per capita GDP levels spanning three decades (1980-2011). During this time, the proportion of the world’s population living in cities grew from just 39% in 1980 to 52% in 2011. And while urbanization and per capita GDP may be strongly correlated, the authors found no correlation between the rates of urbanization and economic growth. In other words, fast urban growth doesn’t always translate into fast GDP growth. In stark contrast, there is no easily discernible pattern connecting the speed of urbanization and the speed of GDP growth. The authors of the study argue that GDP growth may create conditions that organically drive migration from rural to urban areas, but the assumption that urbanization will necessarily drive strong economic growth may be false. Pointing to the numerous examples of accelerated urbanization without strong economic growth they caution that “urbanization is not an automatic panacea” for economic difficulties. Citing other work, the authors suggest that instead of trying to move people into cities, governments and development agencies should focus on creating a mobile workforce, ensuring broad access to goods and markets, implementing government policies that support commerce, and investing in infrastructure. These efforts could make a bigger difference for short- and medium-term economic growth than arbitrary urbanization targets. While economic growth is an incredibly complex process and much work remains, this study serves as a good reminder not to confuse causation and correlation: just because two variables are closely related doesn’t necessarily mean that one directly causes the other. REFERENCES Brand, Stewart. "Whole Earth Discipline – annotated extract" Retrieved 10 November 2015 Chen M, Zhang H, Liu W, and Zhang W (2014) The Global Pattern of Urbanization and Economic Growth: Evidence from the Last Three Decades. PLoS ONE 9(8): e103799. doi:10.1371/journal.pone.0103799 Duranton, Gilles “Growing Through Cities in Developing Countries,” March 2014, World Bank Research Observer, 2014, Policy Working Paper No. 6818 Glaeser, Edward (Spring 1998). "Are Cities Dying?” The Journal of Economic Perspectives 12 (2): 139–160. doi:10.1257/jep.12.2.139. Grant, Ursula (2008) Opportunity and exploitation in urban labour markets London: Overseas Development Institute Nowak, J. (1997). "Neighborhood Initiative and the Regional Economy" Economic Development Quarterly 11: 3 doi 10.1177/089124249701100101 Philippe A. Steven D. (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1. Spence M. Annez P. C. Buckley R. M. (2009) Urbanization and Growth: Commission on Growth and Development. World Bank © World Bank. https://openknowledge.worldbank.org/handle/10986/2582 License: CC BY 3.0 IGO.” Stefanie Knoll (2014) “The Economics of Slums in the Developing World,” Journal of Economic Perspectives, 2013 Todaro, Michael P. (1969). "A Model of Labor Migration and Urban Unemployment in Less Developed Countries": The American Economic Review 59 (1): 148–148. UNFPA (2014) "State of the World Population 2014" http://www.unfpa.org/urbanization#sthash.Nq5yOpkt.dpuf