EDPSE-C07 Urbanization and Rural-Urban Migration Theory and Policy

The Migration and Urbanization Dilemma: the debate of whether developed or developing countries are more urbanized.
More population growth -> more urbanization
Agglomeration economies are the benefits that come when firms and people locate near one another together in cities and industrial clusters.
- Localization (industry or sector) economies??
- Workers benefits
  - saving on transportation
  - firm workplace is near
- Firms benefits
  - saving on transportation
  - skilled workers are near
  - specialized infrastructure
  - potential spillover of knowledge/tech from related industries
- Industrial districts: Industrial district is a place where workers and firms, specialized in a main industry and auxiliary industries, live and work. or Clusters
  - Makes the industry sector more efficient.
  - Developing countries make little progress

Conditions in urbanized cities

Congestion cost: always busy traffic cost time and money
- Industrial districts for productivity also lowers congestion cost.
Different industrial specialization means different size cities
Need of extensive infrastructure in the capital
Smaller cities may be expected in labor-intensive developing countries
- Why?

Urban Gigantism: when the First-City Bias makes people, firms, and investment concentrate in the first and biggest already existing city due to it already having the necessary infrastructure.
Causes of Urban Gigantism:
- Avoid cost of importing/transporting anything by putting every industry in one city
- “Bread and circuses” to prevent unrest
- Hub and spoke transportation system (rather than web) makes transport costs high for small cities
- Compounding effect of locating the national capital in the largest city
  - Makes the problem worse
More slums and poorer living conditions

Jobs, economic activities, that aren’t protected or covered by law
- Coffee shop employment
- Supermarkets
- Sometimes employ more than formal sector
Why urbanization is speeding up?
- There are less obstacles or drawbacks of migrating to cities
  - Communication technology
- Less cost of transportation
  - Closer consumer goods, services (education, fire, police), and workplace.
$W_{A} = \frac{L _{M}}{L _{U C}} (\overline{W}_{M})$
- $L_{A}$ = Labor force in agriculture
- $L_{U C}$ = Labor force in urbanized city (manufacturing)
- $W_{M}$ = Medium wage