Two Down! What are the reasons for the growth in the world’s major urban centres in the twentieth century? Are the reasons for the growth similar to those that explained urban growth in the developed countries?

Once again, if you find a typo or spelling mistake stay schtum. I don’t want to know. Enjoy the wonders of urbanisation.  

Looking across the channel from England, Marx wrote that “the country that is more developed industrially only shows, to the less developed, the image of its own future” (1863-7/1977 pg 9). Marx predicted capitalism, industrialisation and urbanisation would spread to mainland Europe and beyond. In the broadest terms he seems to have been correct; as of 2008 “for the first time in history, the proportion of the population living in urban areas will reach 50 per cent” (UN, 2008 pg 3). However, even Europe did not follow the English model of urbanisation (Hohenberg and Lees 1995 pg 220), and the urbanisation of the twentieth century is more different still.

There is a strong correlation between a country’s income and its level of urbanisation (Todaro and Smith 2006 pg 313), but this relationship itself is not simple. While wealthy countries are almost always highly urbanised, poor countries can either be highly urbanised or overwhelmingly rural. I will argue that this link between income and urbanisation is what has driven urbanisation in both the nineteenth and twentieth centuries. In the nineteenth century urbanisation was associated with rising incomes and this encouraged urbanisation. In the twentieth century, even in the absence of broader economic development, urban areas have maintained an income advantage over rural areas and this has encouraged urbanisation. The body of the essay will develop these ideas further.

This essay we will summarise some of the literature discussing the forces which influence urbanisation. The discussion will then follow a thematic approach comparing the reasons for urban growth in the twentieth and nineteenth century. This discussion will start with a comparison of the rates of urban population growth. Next, the spatial distribution of urban growth in the twentieth and nineteenth century will be discussed. This will be followed by a discussion on migration and the informal sector. Throughout, this essay will look at how the benefits and costs of agglomeration have changed, and the impact of this on urban growth.

It is hard to conceive of a single economic process which would require the establishment of a city; even Ford’s vast River Rouge Complex would not qualify, as it was constructed to house an array of different, albeit integrated, economic processes. For cities to form, agglomeration economies from the interaction of heterogonous economic processes must produce economic benefits. These benefits must also be large enough to outweigh the diseconomies of urbanisation which also exist; for example, crime, pollution and congestion (Glaeser 1998 pp 149-153).[1] Stated briefly, agglomeration economies refer to the benefits of sharing public and private goods and facilities, of improving the matching of supply and demand, [2] and increasing the creation and diffusion of new knowledge and ideas [3] (Duranton and Puga 2004). Transport costs are also minimised in densely populated areas and due to “fixed setup costs or increasing returns” firms must usually take advantage of economies of scale in production and distribution. This should both lead to large markets to attracting firms, and firms’ actions reinforcing the large markets they require (Glaeser 1998 pg 144).

Population growth of urban areas can come from three sources; the urban population can naturally increase through births exceeding deaths, rural areas can be reclassified as urban and migrants can relocate from rural to urban environs. This last mechanism has attracted considerable theoretical interest.[4] Previous theories on migration had difficulty explaining the persistence of migration to areas with high unemployment, which was something observed in the developing world. The Todaro Model overcomes some of the weaknesses of other migration models in that it uses expected income rather than actual income to predict migrants’ behaviour. There also remains room in the model for the important role of the informal sector in reducing the risks of migrating. If urban income is much higher than rural income then even a large unemployment rate will not deter migration as over a long time period the chances of securing a job rise. The model therefore predicts that migration will equalise expected rural and urban income not actual urban and rural income and will therefore continue even in the face of very high unemployment (Todaro and Smith 2006 pp 339-346).

Preston seems roughly correct when he argues “the rate of change in the proportion urban in developing countries is not exceptionally rapid by historical standards; rather it is the growth rates of urban populations that represent an unprecedented phenomenon” (1979 pg 196).[5] The similarities in urbanisation rates do not imply that the same processes are driving urbanisation in the nineteenth and twentieth century. The rate of urbanisation remains subdued because rural population increase also remains rapid (Skeldon 1990 pg 152). Agricultural production expanded massively in the second half of the twentieth century, for example between 1961 and 1985 cereal production more than doubled in the developing world (Conway 1998 chapter 4), this freed up a large quantity of labour and helps to explain the availability of labour for urban areas.

Urban growth in the twentieth century displays a far greater tendency towards first city bias, where urban growth is concentrated on one large metropolis, than the more distributed urbanisation which occurred in the twentieth century.[6] In the nineteenth century, a long period of agricultural development in Europe, and most importantly England, had created the agricultural surplus required for the formation of a system of towns (Wrigley 2006). The antecedent of rapid urban growth in the nineteenth century was the creation of a system of central places in which market activity could occur (De Vries 1984) and a network proto-industrial regions which foreshadowed the industrial revolution (Hohenberg and Lees 1995 pp 180-184). Moreover, “triumphant liberal ideology [and] competing claims for capital” meant that urbanisation occurred at times with weak centralising forces and undirected migration (Hohenberg, 2004 pg 3041).

In contrast the development of major urban centres in the twentieth century occurred in a very different context. Developmental strategy for twentieth century was often focussed on overcoming market failure. For example, a perceived failure of markets to invest in “social overhead capital like transport, communication, power, urban infrastructure, and so on” was taken as impetus for the state to emerge “in the role of an investment planner in a developing country” (Datta-Chudhuri, 1990 pp 26-27). Although this investment is necessary in rural areas too, other institutional factors led to an urban bias in policy making; and often this resulted in a bias towards the first city to reach a sufficient level of agglomeration. Under import substitution industrialisation with a high level of protection, it is rational for firms to concentrate in a single city. Doing so, minimises transport costs and in the absence of large volumes of external trade and allows companies to locate near their main market (Todaro and Smith 2006 pg 326). Thus, in the twentieth century national developmental policy often had the unintended consequence that urban growth became concentrated.[7]

The institutions which generated the first city bias tangled with twentieth century urbanisation are also, I would argue, responsible in large part for the breakdown in the relationship between economic growth and urbanisation. Although industrialisation usually brings with it urbanisation and economic growth, the reverse is not necessarily true, as the experience of Latin America illustrates (Butterworth and Chance 1981 pg 34). In fact Latin America offers us a good case study of urbanisation without sustained industrialisation. The Latin American rural-urban divide is characterised by the disproportionate quality of schools, hospitals and other public services in urban areas (Butterworth and Chance 1981 pp 49-50). The Todaro model discussed above would thus predict, and explain, the rural-urban migration which can be observed, and the predominance of urban settlement even in the face of high unemployment.

This superior urban environment contrasts sharply with the experience of urban living in the nineteenth century. To take one example, urbanisation was rarely associated with good health, in fact, “national infant mortality rates were significantly correlated with the proportion of the population living in cities of 20,000 or more” (Kunitz 1983 pp 358).[8] In contrast, in Brazil in the mid-1980s “infant mortality rates ranged from a low of 37.7 in urban areas of the Southeast region to a high of 127.1 in rural areas of the Northeast region” (Sastry 1997 pg 989).[9] This is a clear contrast between the patterns of urbanisation in nineteenth and twentieth century. Rapid rural-urban migration can be seen as a result of distortions or sectoral imbalances stemming from the institutions of  developing countries (Preston 179 pg 195).

Dick Whittington arriving in London with a bag over his shoulder can be taken to represent the folk image of city growth through migration. The truth of the matter is, somewhat inevitably, significantly more nuanced. For example, one of the forces driving twentieth century urbanisation is not the movement of people to cities, but of cities to people. Areas previously recorded as rural being reclassified as urban has at times throughout the twentieth century been responsible for “the most important part of the ‘net-migration and reclassification’ component” (Skeldon 1990 pg 156). In comparison with the nineteenth century where development was associated with in-migration (Todaro and Smith 2006 pg 337), a large factor in twentieth century urbanisation can be seen as something of a statistical quirk, the lives of those reclassified may change little, but they are become included in statistics of urbanisation.

However, even if reclassification has at times been responsible for much urbanisation, the absolute contribution of migration to the rate of urban growth has been large. In developing countries in the twentieth century 40-50% of urban population growth came from rural-urban migration or reclassification, the remainder comes from natural increase of the urban population (Hamer and Linn 1987 pp 1258-9). Although tempting to view this mobility as a new phenomenon emerging in response to industrialisation, Jahn and Straubhaar argue that migration has been an essential element of livelihood strategies (1998 pg 7). Facilitating the rural-urban migration seen in the developing world, in the absence of significant and sustained economic growth, is the informal sector.

Developing economies, and in particular developing cities, are today characterised by a large informal sector which is characterised by low barriers to entry, unskilled labour and little capital investment (Skeldon 1990 pp 162-163). Because of this, the informal sector is able to absorb large numbers of workers and provide employment and income for a large proportion of the urban labour force (Todaro and Smith 2006 pp 328-334). The informal sector plays a large role in generating the agglomeration benefits of the sprawling cities of the developing world. The low barriers to entry and low capital requirements serve to improve the matching of supply and demand for labour in what are often highly sub-optimal labour markets.

The urbanisation of the twentieth century appears to have occurred under very different circumstances to that of the nineteenth. However, both experience of urbanisation reaffirm the ability for cities to generate agglomeration benefits which make urban living attractive. Migration was an important driving force in both centuries, but movements have been driven by different forces. Industrialisation in the nineteenth century drove urbanisation and the international division of labour provided the impetus for the creation of new cities and the addition of population to new ones (Hohenberg and Lees 1995 pp 184-85). In contrast, the policies of twentieth century states have induced urbanisation through lopsided investment in infrastructure and through closing off domestic markets from international trade. However, people have still chosen to live in urban areas. The expansion, success and impressive rate of return of the informal sector (Banerjee 1986) illustrates that even under seriously sub-optimal institutions, cities offer strong economies of agglomeration. 

Bibliography

Banerjee, B. (1986) Rural to Urban Migration and the Urban Labour Market: A Case Study of Delhi (Bombay: Himalaya Publishing House)

Becker, C. M. and A R Morrison (1999) “Urbanisation in Transforming Economies” in P Cheshire and E S Mills (eds) Handbook of Urban and Regional Economics, vol. 3 (Amsterdam: North-Holland) pp 1673-1790

Butterworth and Chance (1981) Latin American urbanization (Cambridge: Cambridge University Press)

Conway, Gordon (1998) The Doubly Green Revolution: Food For All In The Twenty-First Century (New York: Comstock Publishing)

Datta-Chudhuri, M. (1990) “Market Failure and Government Failure” in The Journal of Economic Perspectives vo. 4 no. 3, pp. 25-39

Davin, D. (1999) Internal Migration in Contemporary China (Great Britain: Macmillan Press)

De Vries, J. (1984) European urbanization, 1500-1800 (Great Britain: Methuen)

Dixit A. (1973) “The Optimum Factory Town” in Bell Journal of Economics and Management Science Vol. 4, No. 2, pp. 637-651

Duranton, G. and Puga, D. (2004) “Micro-foundations of urban agglomeration economies” in V. Henderson and J. F. Thisse, (eds) Handbook of Urban and Regional Economics, vol. 4 (Amsterdam: North-Holland Press) pp 2035-2111

Glaeser E. (1998) “Are Cities Dying ?” in Journal of Economic Perspectives, vol. 12 no. 2, pp 139-160

Hamer, A. M. and J. F. Linn (1987) “Urbanisation in the Developing World: Patterns, Issues, and Policies” in E S Mills (ed) Handbook of Urban and Regional Economics, vol. 2 (Amsterdam: North-Holland) pp 1255-1284

Hohenberg P. and L Lees, (1995) The Making of Urban Europe, 1000-1994 (USA: Harvard University Press)

Hohenberg, P. (2004) “The Historical Geography of European Cities: An Interpretive Essay” in J. Henderson & J. F. Thisse (ed.) Handbook of Regional and Urban Economics, vol 4. (Amsterdam: North-Holland) pp 3021-3052

Jahn A. & F. Straubhaar, (1998) ‘A Survey of the Economics of Illegal Immigration’, in M.Baldwin-Edwards & J. Arango (eds.), Immigrants and the Informal Economy in Southern Europe (Great Britain: Frank Cass Publishers) pp 16-42

Kunitz, S. J., (1983) ‘Speculations on the European mortality decline’ Economic History Review, vol. 36 pp. 349-64

Marx, Karl (1863-7/1977), Capital: A Critique of Political Economy, vol, 1. (New York: Vintage Books)

Mazumdar, D. (1987) “Rural-Urban Migration in Developing Countries” in E S Mills (ed) Handbook of Urban and Regional Economics, vol. 2 (Amsterdam: North-Holland) pp 1097-1129

Preston, S. (1979) ‘Urban Growth in Developing Countries: a Demographic Reappraisal’ in Population and Development Review vol. 5 pp 195-215

Skeldon, R. (1990) Population Mobility in Developing Countries: a Reinterpretation (London: Belhaven Press)

Skeldon, R (1996), “Migration from China” in The Journal of International Affairs, vol. 49, no. 2, pp 434-55

Sastry, N. (1997) “What explains rural-urban differentials in child mortality in Brazil?” in Social Science & Medicine vol. 44 no 7. pp 989-1002

Tilly, C. (1992) Coercion, capital, and European states, A.D.990-1990 (USA: Basil Blackwell)

Todaro, M. and S Smith (2006) Economic Development (USA: Pearson Education Ltd)

UN Department of Economic and Social Affairs (2008) World Urbanization Prospects: The 2007 Revision: Highlights (New York: United Nations)

Vuletin, G. (2008). “Measuring the Informal Economy in Latin America and the Caribbean” IMF Working Paper, WP/08/102, (Washington DC: International Monetary Fund)

Wrigley, E.A. (2006) ‘The Transition to an Advanced Organic Economy’ in Economic History Review vol. 59 no. 3 pp 435-80.


[1] Dixit (1973) models the diseconomies of congestion on the “optimum factory town” and under his limited assumptions he finds the existence of cities of over a million inhabitants hard to explain or justify in terms of positive agglomeration economies and negative congestion diseconomies.

[2] Peter Diamond, Dale Mortensen and Christopher Pissarides all recently won the Nobel Prize for Economics for highlighting the importance of search costs in labour markets. Cities play an important role in reducing these search costs and this implies a major positive agglomeration economy from the formation of cities.

[3] As Duranton and Puga point out, this is a benefit from urbanisation which has been recognised as long ago as 1890 when Alfred Marshall wrote his Principles of Economics.

[4] The best known model was formulated by Arthur Lewis in the 1950s. This model assumes surplus labour in rural regions and full employment in urban areas. When a small wage premium is offered the Lewis model predicts rural-urban migration and economic development as zero marginal product labour is put to productive use in the formal urban economy (Todaro and Smith 2006 pp 108-113). However, the Lewis model would not predict the migration which has occurred in the twentieth century as labour does not appear to be in surplus in rural areas, and urban centres are characterised by high rates of unemployment.

[5] Even China’s post-reform urban population growth is not exceptionally explosive by historical standards. Annual urban population growth in developing countries measured 4.7% in the 1950s and 4.0% in the 1960s, with vaguer estimates of between 3.6% and 4.4% for the 1970s and 1980s (Becker and Morrison 1999 pg 1675). The rate in China from 1978 to 1990 was within the bounds set by recent historical experience, at 4.5% per annum (Fujita et al 2004 pg 2962).

[6] The development of London and Paris being the notable exceptions to this general rule, as primate cities in England and France they stunted growth in other viable urban centres. Their size came from their dual functioning as nodes in both national and international divisions of labour, finance and trade, and from their positions as seats of power in what was for the time highly centralised states (Hohenberg and Lees 1995 pp 220-221).

[7] Less salubrious reasons for urban gigantism may include the possibility of firms to congregate in capital cities in order to minimise the transaction costs of bribing and influencing the government and the possibility of dictators or authoritarian regimes encouraging large cities to reduce the transaction costs of bribing the populace into allowing them to retain power (Todaro and Smith 2006 pp 325-327) In either case the agglomeration advantages of cities retain their explanatory primacy; however, they offer economies of scale for sharing out “bread and circuses” and help provide thicker markets for bribery.

[8] Although life was undoubtedly hard for urban inhabitants in the nineteenth century, exclusively urban mortality rates are hard to determine because of the presence of so many migrants. It has been argued that due to the high mortality of migrants in cities, urban areas of the nineteenth century look more hazardous than they were (Skeldon 1990 pg 35).

[9] Infant mortality is given as 142 in England and Wales in 1885-89 (Kunitz 1983 pp 359), implying only slight improvement in the century between 1880s England and regions of 1980s Brazil.

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One thought on “Two Down! What are the reasons for the growth in the world’s major urban centres in the twentieth century? Are the reasons for the growth similar to those that explained urban growth in the developed countries?

  1. Most of people migrating from rular to urban centers, are either in search of jobs and green pastures or are running away from the hostility of their parents or they are seeeking higher education.The result of this migration has lead to emerging of over populated cities,increase in crime and confusion in the government on how to shelter this people.I will request the government to make sure that there is equal distribution of resourses in all parts of the nation.Development of infrustructures should also be enhanced in all division of authority and this will lead to job creation for youths.

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