While some nations have seen rapid urbanization lead to economic progress, others have fallen behind.
Urbanization has long been a powerful engine of economic growth in the United States, Europe, and advanced western nations. But the connection between urbanization and growth is far weaker in developing nations, which not coincidentally are undergoing the greatest wave of urbanization in human history. In fact, many of these places are experiencing the potentially devastating phenomena of “urbanization without growth,” leaving billions of residents mired in poverty. A new study from Edward Glaeser and his colleagues at Harvard University compares the process of urbanization in three of the world’s largest emerging economies—Brazil, China, and India—to that of the United States.
The level and pace of urbanization has varied in each country. Starting in 1965, the U.S. was already around 70 percent urban, Brazil was nearly one-half urban, and India and China were almost entirely rural. Over the past five decades, China has urbanized rapidly, reaching a little less than 60 percent by 2015. India’s urban growth has been much slower, rising from 18 percent in 1960 to 31 percent by 2010. Brazil is the most urbanized of the bunch, with an urbanization level of more than 80 percent—greater than that of the United States. Generally speaking, Latin America tends to be far more more urbanized than Asia, although Asia is expected to see rapid urbanization in the coming decades.
Patterns of urban size and growth
Let’s start with the wonky part of the study, which considers how well these countries match up to two common principles of urbanization. The first principle is the so-called “rank-size rule,” a common benchmark of urban systems, which characterizes a country by its largest city or metro. According to this rule, all other cities can be ranked in terms of the size of this largest city, so the second largest city or cities will have half the population of the first, the third largest cities will have a third of the population, and so on. (This is based on a common power law seen in most physical, biological, economic, and social systems known as Zipf’s Law.) While this hierarchy of cities seems to hold true for the U.S. and Brazil, India and China have fewer large cities than Zipf’s Law might predict, according to the study.
The second principle is Gibrat’s Law, which holds that a city’s population growth is more a matter of chance than a product of its initial population level. While Gibrat’s Law appears to hold true for the U.S. today, this was not always the case throughout the country’s history. Brazil seems to have followed Gibrat’s Law for the past few decades (from 1980 to 2010), as has the U.S., but India and China have not. There is no correlation between the growth of India and China’s cities in the past few decades and the initial size of their population. According to the study, this likely stems from the more recent rapid pace of urbanization and city growth in these nations. In other words, the cities and metros that have grown recently in India and China were not necessarily the biggest in 1980.
Cities and the wealth and happiness of nations
Next, the study takes on the critical connection between population and wealth. If urbanization is successful, growing urban populations should correspond with higher incomes and levels of development. (In econ-speak, the study refers to this as “spatial equilibrium.”) To measure spatial equilibrium, the study probes at the relationship between income levels and rents.
Take a look at the chart below (from the study) which shows the relationship between the two. The lines for the U.S. and Brazil look similar, sloping upward and to the right, highlighting the connection between rents and income. But the lines are much flatter for India and China. The correlation between rent and income is weak for China’s cities, and practically non-existent for India’s.
Relationship Between Income and Rents (2010)
The study also looks at the relationship between urbanization and happiness. In general, happiness tends to rise with income, and there is a threshold of roughly $10,000 a year that seems to be be required for a modicum of it. Since income tends to rise with urbanization, we might expect a connection between happiness and urbanization—although recent research has shown that happiness trails off in the very largest cities. While income and happiness are only weakly related in U.S. cities, the relationship is slightly stronger, but still weak, in both China and India. (Data for Brazil was not available.) Other research finds that happiness trails off in large, dense cities, perhaps as a result of the noise, congestion, stress, and other problems that big city residents face.
The study also considers the rate at which people move across these four nations. Mobility is important because it enables people to move to places that offer greater opportunity. In the study, mobility increased in only one country, China, where it more than doubled from 6.3 percent in 2000 to 12.8 percent in 2010. Mobility in Brazil fell from 9.1 percent in 2000 to 7.1 percent in 2010, just as mobility has declined substantially in the U.S over the past two decades. Finally, mobility stayed low in India, where just 2 percent of the population moved between 2006 and 2010.
Density and human capital
Perhaps the biggest factors propelling urbanization and development are density and human capital. A wide body of research has shown how dense cities attract talent and propel economic development, rising incomes, and rising living standards. The good news is that in all three developing countries—Brazil, China, and India—the study finds a stronger correlation between human capital and economic success compared to the U.S. Both India and China also show a stronger correlation between density and economic prosperity than the U.S. or Brazil.
Glaeser’s analysis also finds that higher levels of human capital are associated with urban population growth in Brazil, China, and the U.S. This effect is most pronounced in China, where a 1 percentage point increase in the share of adults with college degrees is associated with a 22 percentage point increase in population growth between 1980 and 2010. Similarly, in Brazil, a 1 percentage point increase in the share of adults with college degrees is associated with a 6 percentage point increase in population growth. This compares to the U.S., where a 1 percentage point increase in the share of degrees is associated with a 2.2 percentage point increase in population growth. Although the study lacks comparable data for India, it finds that education is a relatively weak indicator of population growth in that nation.
Ultimately, the study concludes that patterns of urbanization and economic growth in the U.S. are more applicable to some developing and urbanizing countries than others. Brazil appears to most closely resemble the U.S., which makes sense, given that it is the most urbanized of the three developing nations. China’s pattern resembles some aspects of the U.S., but not others. India’s urbanization pattern, meanwhile, is failing to generate almost any of the gains in income, happiness, and mobility that the U.S., Brazil, and China have experienced.
In the end, the study reveals a stark difference between already-urbanized nations—which have benefited from a strong connection between urbanization, human capital, accumulation, and economic growth—and less-developed nations, where the connection remains much weaker and mobility is lower. Despite this, the authors conclude on an optimistic note, arguing that “the forces that drive urban success seem similar in the rich and poor world, even if limited migration and difficult housing markets make it harder for a spatial equilibrium to develop.”
I come away with a more pessimistic reading of their study, especially when taken in combination with recent research on the process of urbanization without growth. In fact, some of Glaeser’s own research (which I wrote about on this site) suggests that many emerging economies are trapped in what he dubs “poor country urbanization,” where globalization has sundered the processes that connected urbanization and growth in the past. Left unchecked, it’s likely that future urbanization in much of the developing world will look more like what’s happening in India than what has occurred in Brazil or China.