April 2009

Megacities and Urban Agglomeration

Dramatic decreases in costs of transport, communication and information technology should have reduced spatial disparities in economic activities and moved us to a ‘global village’.  Yet, we find that in both industrial and developing countries, economic activities are concentrated in a few centers and there are regional disparities.  For example, about 15 percent of world population live in temperate zones but produce 50 percent of world GDP.  In United States, counties that take up 2 percent of the land area produce more than half of U.S. GDP. Similarly, poverty is concentrated in a few pockets in many countries.  It was Krugman (1991) who deduced that agglomeration economies accrue at plant level and hence firms are located in a single area nearer to consumer demand in urban areas with large populations and minimal transport costs.  In other words, location of economic activity matters and a tiny (initial) difference may soon lead to a concentration of economic activity around a center and ultimately to a formation of industry cluster in the same space.  Agglomeration economies accrue at plant level, industry level or city and regional level.

From Raj Nallari and Indira Iyer's lecture notes.

Urban Slums

As quality urban housing is costly, the increasing numbers of urban poor start living in slums where water and sanitation facilities are inadequate and living conditions are crowded and often unhealthy. The UN estimates that the number of people living in slums passed 1 billion in 2007 and could reach 1.39 billion in 2020, although there are large variations among regions. In Asia and the Pacific, two out of five urban dwellers live in slums, compared with three out of five in Africa.

In percentage terms, sub-Saharan Africa has about 72 percent of city dwellers living in slums. Asia has by far the highest number of city dwellers living in slums - the problem is worst in South Asia, where half of the urban population is composed of slum dwellers. The figure below illustrates the share of slum population in some Asian and Pacific countries. In 2001, Afghanistan had as much as 99 per cent of the urban population living in slums while Nepal and Bangladesh also had high proportions-92 and 85 per cent, respectively, although they have had some success in containing the problem since 1990.

Share of slum population in urban areas in selected Asian and Pacific countries, 1990 and 2001

Starting today, the Growth Commission Blog has launched an online discussion dedicated solely to issues related to the financial crisis, featuring opinions and commentary from experts around the world.

More discussion about the Financial Crisis and its impact on developing countries in our own series: Global Dialogues as a Response to the Global Economic Crisis.