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Urbanization and Rural-Urban Migration: Theory and Policy (II. The Role of…
Urbanization and Rural-Urban Migration: Theory and Policy
II. The Role of Cities
Economic Definition of a City:
An area with relatively high population density that contains a set of closely related activities.
Cities provide cost advantages to producers and consumers
Forward Linkage:
As transportation costs are high, living in cities where most firms are located will save firm-to-firm, or firm-to-consumer transportation.
Backward Linkage:
As many people live in a city, firms can easily draw on a large pool of workers with specific skills used in the sector or from specialized infrastructure.
Incentives for firms to locate in a city
Managers from different firms can learn from each other formally (joint ventures), and informally (tips from social clubs or over meal).
When an unusually large orders present, contracting will be easier. Thus, a firm of modest size does not have to turn down a big job due to lack of capacity, an arrangement that provides "flexible specialization".
Both producers and consumers will know where to shop; creating a marketing advantage.
Firms may wish to operate in well-known districts for the marketing advantages of locating where company procurers and household consumers of their goods know to shop to get the best selection.
Other benefits of industrial districts
(Active Collective Efficiency) Benefits such as developing training facilities or lobbying government for needed infrastructure can be achieved through collective action.
(Passive Collective Efficiency) For example, in U.S., many innovative computer firms located in Silicon Valley, California, simply because other such firms were already located there.
Inefficiency should presents if most industries located in a single city, creating congestion.
The cost of real estate: The higher the urban density, the higher costs of real estate.
Longer commute and greater transportation cost: Workers may demand higher wages to cover these costs.
The costs of infrastructure: Costs of water and sewer systems are higher in concentrated urban areas.
I. Urbanization: Trends and Living Conditions
The more developed the country, the greater share of population would be living in urban areas.
Urbanization is happening everywhere whether the country is growing positively or not.
Urban Bias
Most developing countries' govt. tend to favour the urban sector while determining development policies, widening the gap between urban and rural economies.
Central question
: How these cities will cope - economically, environmentally, and politically - with such high and rapidly rising concentrations of people?
Advantages of Urbanization
: Cities offer the cost-reducing advantages of agglomeration economies and economies of scale and proximity, as well as numerous economic and social externalities.
Costs of Urbanization
: The social costs of increasingly overloading of housing and social services, increased crime, pollution, and congestion, can outweigh the
urban advantages
.
III. The Urban Giantism Problem
IV. The Urban Informal : : Sector
V. Migration and Development
VI. Toward an Economic Theory of Rural-Urban Migration
