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Fast urbanization does not boost economy, study shows

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Posted August 7, 2014

World became more urbanized over the last three decades. Expanding urban areas helped to boost local economies. Many policy makers think that fast development of the cities can be beneficial. However, this assumption is unwarranted. A recent study carried out by Chinese scientists failed to find correlation between urbanization speed and GDP rate.

Picture: Beijing panorama. Image credit: ahenobarbus/Flickr, CC-BY 2.0

Picture: Beijing panorama. Image credit: ahenobarbus/Flickr, CC-BY 2.0

“Hence, we conclude that a given country cannot obtain the expected economic benefits from accelerated urbanization, especially if it takes the form of government-led urbanization. In addition, only when all facets are taken into consideration can we fully assess the urbanization process,” the scholars argue.

Positive relationship between enlargement of the cities and economic improvement is well documented. This study only supports this position. Some countries, such as China or Korea, managed to combine fast increase of GDP with explosive build up of the metropolitan areas and became roles models for other developing areas.

“It is generally accepted that economic growth promotes the expansion of modern industries and an increase in the urban population; in turn, urbanization also promotes economic growth to some extent. Various programs of accelerated urbanization and rapid economic growth have, therefore, been embarked upon in many developing countries,” the scholars say. However, Mingxing Chen and his colleagues argue that situation is not so simple.

They have investigated how urbanization speed affected economic prosperity since 1980’s. “In the medium to short term, urbanization speed has little effect on economic growth rate. Consequently, accelerated urbanization without parallel economic growth often occurs in the world,” the researchers claim.

There is no doubt, that this discovery can have significant policy implications. It shows that value of urbanization speed is overrated. Politicians should focus on other factors which could develop country’s economy, such as institutional reforms or educational development. In addition, scholars point out that expansion of the cities is a complex phenomenon tightly related to many important issues. “The forward effects of urbanization should be comprehensively evaluated, including economic, social, and environmental sustainability,” they say.

Article: Chen M., Zhang H., Liu W., Zhang W., 2014, The Global Pattern of Urbanization and Economic Growth: Evidence from the Last Three Decades. PloS ONE 9(8): e103799. doi:10.1371/journal.pone.0103799, source link.

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