Urban Development and Growth

8/18/2019 Urban Development and Growth

1/19

Urban Development and EconomicGrowth in Bangladesh

Somik LallThe World Bank

Workshop on Growth & Employment,December 12 2!!"


2/19

Outline• Bangladesh is predominantl# r$ral b$t rapidl#

$rbani%ing• &cross co$ntries $rbani%ation is t#picall# seen to

accompan# and lead economic growth 'economic andinstit$tional trans(ormation)

• *er(ormance o( individ$al cities is conditioned on locale((orts as well as national + regional circ$mstances

• ,apid pop$lation growth poses challenges (orproviding cons$mer and prod$cer services

• What strategies are $se($l (or improving thecontrib$tion o( the $rbani%ation process to economicgrowth-


3/19

Across countries, urbanization

accompanies economic transformation

Urban population (% of total)

So$rce. World Development /ndicators 2!!1

!

1!

2!

0!

!

"!

!

3!

4!

15 " 153! 153" 154! 154" 155! 155" 1555

A g r i c u

l t u r e

%

!

"

1!

1"

2!

2"

0!

0"

!

"

Labor (orce in agric$lt$re '6 o( total) &gric$lt$re val$e added '6 o( GD*)

U r b a n

%


4/19

And the Importance of agriculture diminishes ascountries get richer

1!!

1 !!!

1! !!!

1!! !!!

1 1! 1!!

Agriculture, value added as percent of GDP, 2000

P e r c a p

i t a G

D P

, 2 0 0 0

Bangladesh

So$rce. World Bank /ndicators '2!!! data)


5/19

!

2!

!

!

4!

1!!

12!

1 !

1 !

14!

2!!

P o p u

l a t i o n ,

i l l i o n s

Total,$ral

Urban

So$rce. United 7ations World Urbani%ation *rospects

Share of urban population is rapidly increasing In angladesh


6/19

!

1!

2!

0!

!

"!

!

3!

4!

5!1!!

1 0 " 3 5 11 10 1" 13 15 21 20 2"

!

P e r c

e n

t " !!!

1! !!!2! !!!

8$m$lative r$ral pop$lation b#distance (rom di((erent si%e towns

So$rce. G/S calc$lations $sing W&,*9+8EG/S data: based on 1551 cens$s (ig$res;*ercentages are likel# to be higher toda# as towns have increased in si%e and asr$ral areas near larger towns have grown (aster than more remote areas;

And much of the rural population is in close pro!imity tourban centers

"ini u to#n populationDistanceless than

$,000 %0,000 20,000

2 ! 5; 4; 3;4

$ !24;1 2 ; 2!;

%0 ! 42;! 32; "5;!%$ ! 5 ; 51; 41;


7/19

"rbanization has been characterized by #e!cessi$e%concentration in a few agglomerations

At the other end of the size distribution: 300 other urban areasaccount for only 4 percent of the urban population

Table 1: Population growth of the largest agglomerations

City PopulationRank (2000

Population(2000

Population(!""0

Population(!"#0

Population(!"$0

Annual%ro&th(!"$0'

2000haka ! !2300 ))!" 324# !4$4 $*!+

Chitta,on, 2 3-#! 22)- !333 )"3 -*-+.hulna 3 !42) "$2 )22 3!0 -*!+Ra/shahi 4 !0!) -!$ 23# !0- $*)+

y1ensin,h - 32# !#" !0# *A* '

Co1illa ) 30$ !3- !2) #) 4*2+ ote !: Population in thousands ote 2: ata are for a,,lo1erations


8/19

"rban concentration is consistent withcountries at similar income le$els

• Dhaka acco$nts (or 026 o( $rban pop$lation• 8oncentration is important (or e((icienc# in earl# stages o(

development• There is an optimal range o( concentration which varies with

economic development < increases peaks declines

Urban concentration in comparator counties (%)

South Asia Region Per capita Incomes an! area "istoric IncomesCountry Pri1acy Country Pri1acy Country Pri1acy Country Pri1acy

ndia -*$2 Ca1eroon 22*4# 5ul,aria 20*#4 Colo1bia($-

20*!)

Pakistan 2!*"4 on,olia -)*2$ %uate1ala 20*0" 6onduras(#-

3-*4#

7ene,al 43*-3 .orea 23*2# Ar1enia("-

-0*#-

.yr,yz

Republic

4-*-0 6onduras 2$*2- 8urkey ($- 2!*)3

#ata Source: $#I Tables SI&A


9/19

8ore=peripher#pattern withDhaka as theprimar# center

and the portcities '>h$lnaand 8hittagong)as secondar#centers

'conomic acti itis also concentrate!aroun! ma*or

agglomerations


10/19

actors promoting urban concentration

• 7ational political instit$tions ' – &llocation o( local p$blic e?pendit$res in centrali%ed

settings. national government ma# (avor one or two citieswhere decision=makers live;

– @avoritism involving the national government not choosing toinvest s$((icientl# in interregional transport andtelecomm$nications so hinterland cities are less competitivelocations: and

• 8entral government is directl# responsible (or $rbanand regional development

• @ail$res o( national land development markets – With limited local (iscal a$tonom# land developers and local

governments cannot develop alternate locations and spread

development across the $rban hierarch#;


11/19

Implications of urban concentration(positi$es)

• Bene(its (rom economies o( scale andagglomeration

• Economic trans(ormation with large cities

leading man$(act$ring + ind$strialrepresentation – Dhaka and 8hittagong have over seven times the national

representation o( emplo#ment in garments and machiner#; – 8o=location o( b$siness and (inancial services boost (irm

level per(ormance• Thick labor markets• Aigher $alit# o( li(e (or residents as these cities can

do better in proving local p$blic goods and services


12/19

Implications of e!cessi$e urbanconcentration (costs)

• Aigh prices (or immobile (actors 'land andho$sing)

• Aigh comm$ting costs 'leading to a

segmented labor market) along withcongestion and poll$tion diseconomies• Canagement (ail$res lead to bottlenecks in

in(rastr$ct$re and service provision thereb#increasing prod$ction costs

• This translates into lower wel(are and overalleconomic per(ormance


13/19

M i c r o g r a m / m 3

*C2;" &verage

0

50

100

150

200

250

300

350

1 2 / 2

5 / 2 0

0 2

1 2 / 2

7 / 2 0

0 2

1 2 / 2

9 / 2 0

0 2

1 2 / 3

1 / 2 0

0 2

1 / 2 /

2 0 0 3

1 / 4 /

2 0 0 3

1 / 6 /

2 0 0 3

Dhaka was ranked as one o( the most poll$ted cities inthe World b$t *C2;" concentrations have declined b#

16 beca$se o( Two Stroke *haseo$t


14/19

Low satis(action with p$blic services

Table 1: Satisfaction with Ser ices (% of sur e e! househol!s)

Services Dhaka Chittagong Khulna Rajshahi

Police 2 0 1 2

Land Registration 2 1 10 4

Transport 7 3 19 6

Electricity Services 8 2 12 2

!diciary 8 1 2 "

#ealt$ %are 11 4 18 9

&ar'age (isposal 1" 10 12 10

Se)erage*

Sanitation

17 16 11 16

Ed!cation 21 " 28 12

(rin+ing ,ater 27 9 11 8

7ource: Proshikha (2002


15/19

Does the distorted $rban s#stem translateinto lost opport$nities (or economic growth-

• The central link between concentration and economicper(ormance revolves aro$nd economies o( scale;

• /( cities are too small reso$rces co$ld be spread toothinl#+evenl# across cities and scale economies arenot e((icientl# e?ploited;

• Aowever i( reso$rces are over=concentrated in oneor two e?cessivel# large cities this raises costs o(prod$ction o( goods and lowers the $alit# o( $rbanservice provision;


16/19

Table 1: The 'ffect on Annual 'conomic +rowth Rates of Urban ,oncentration

The optimal!egree of urban

primac

oss in growth ratefrom e-cessi eprimac (one

stan!ar! !e iation)

+rowth effect of a onestan!ar! !e iation increasein roa! !ensit in a countr

with e-cessi e primac9o& inco1e (:!!00 *!- *$! *23

ediu1 inco1e(:4"00

*2- !*) *)#

6i,h inco1e(:!3400

*23 !*) *)#

8he table looks at a 1ediu1 size country ''national urban population of 22 1illion* u1bers for countries &ithurban populations of up to -0')0 1illion are si1ilar* 8he first colu1n calculates the de,ree of urban pri1acy that1a;i1izes ,ro&th rates and steady state inco1e leuite ti,ht (standard error of *0!# * 8he ,ro&th losses of e;cessi


17/19

Growth implications (or Bangladesh• /n 2!!! Urban pop$lation o( 0" million: income per capita '1543

**) o( aro$nd 21!!;• &t this income level and $rban scale Bangladesh sho$ld have

an optimalF primac# val$e o( aro$nd 21 percent;• /n practice primac# is 02 percent == 11 percent points higher

than optimal val$es;• Based on AendersonFs estimates primac# in Bangladesh is

more than 2 standard deviations higher that the optimal range;• &t this income range and $rban scale one standard deviation

increase (rom optimal val$es red$ces growth b# 1 percent; &lower bo$nd estimate o( moving (rom two standard deviationsabove optimal val$e to the optimal val$e wo$ld increase GD*per capita growth rates b# at least 2 percent points;


18/19

Aow do we improve the contrib$tion o( the$rbani%ation process to economic growth-

• & proving anage ent of the largestagglo erations

• Dhaka 'and other ma or cities) will contin$e to attractrapid pop$lation growth $nless other $rban centersbecome viable investment decisions;

• *er(ormance o( ma or agglomerations need to beenhanced

– /nstit$tional re(orm –

*rovision o( serviced land – Enhancement o( own so$rce reven$es• /nvestments in inter regional in(rastr$ct$re to de=

concentrate standardi%ed man$(act$ring


19/19

Aow do we improve the contrib$tion o( the$rbani%ation process to economic growth-

• Developing alternate locations• Enhance the abilit# o( *o$rashavas to provide local

services that are val$ed b# local resident 'b$t how-)

• BCD@ ma# be a $se($l vehicle (or local in(rastr$ct$reimprovements

• There ma# however be adverse wel(areconse $ences i( reso$rces are spread too thinl# orlarge cities are starved in order to stim$late smallercenters

Urban Development and Growth

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