Urbanization and poverty reduction in Africa

Brookings had an interesting article a short while back with an interesting analysis on urbanization in Africa that’s forced me to rethink my priors on urbanization as a tool of poverty reduction.

It seems that there are important differences in the reasons for urbanization in the developed world vs much of Africa. While urbanization has a been a driver of enormous creativity and growth in the Western world, Africa has largely not seen the push/pull dynamic of advances in agricultural productivity (that would allow people to leave rural areas for the city) and industrial productivity (that would lure people to the city in the first place) that was the case here.

If these forces are absent, what is driving African urbanization? The authors point to three strands of research. One is that urbanization is driven by natural resource extraction, the exports of which create wealth. Remi Jedwab at George Washington University has a paper that suggests that in areas that derive their income from the exports of natural resources, the people tend to desire urban amenities with their newfound cash. What are these urban amenities? Well, they tend to be in the non-tradables sector; that is, services which can’t simply be bought from abroad. So this creates a labor pull, but without the commensurate increase in productivity. Instead, basically all economic activity is sourced from the rents from resource extraction. This leads to low productivity, service sector oriented cities, which Jedwab dubs ‘consumption cities’. (The whole paper is worth a read, it serves as a pretty good overview of this topic).

Another strand posits that politics is a driver of urbanization. Apparently, some research suggests that the capitals of autocratic governments are larger than they ‘should’ be, and this makes sense. In many of these countries, the formal sector is severely constrained or practically absent, and a government job is the closest guarantee to success there is. So, people will try to relocate to the source of political power in the hopes of making connections.

The final strand discussed is improvements in health. There seems to be evidence that, contra the history of industrialization in the West, new urban areas have far better health outcomes than rural areas, and the effect is greater the larger the city. Indeed, even growing up in the slums of a large urban area is still healthier than being raised in a rural area, which is pretty crazy. We could imagine that if people are aware of the health related possibilities in urban areas they would relocate even absent any other incentives.

The message here is that the reasons for urbanization matter, and it isn’t a given that the good things associated with urbanization in the developed world will follow just by throwing a bunch of people together in close proximity.

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