At the heart of urban economics are agglomeration economies, which drive the existence and extent of cities and are also central to structural transformation and the urbanization process. This paper evaluates the use of different measures of economic density in assessing urban agglomeration effects, by examining how well they explain household income differences across cities and neighborhoods in six African countries. We examine simple scale and density measures and more nuanced ones which capture in second moments the extent of clustering within cities. The evidence suggests that more nuanced measures attempting to capture within-city differences in the extent of clustering do no better than a simple density measure in explaining income differences across cities, at least for the current degree of accuracy in measuring clustering. However, simple city scale measures such as total population are inferior to density measures and to some degree misleading. We find large household income premiums from being in bigger and particularly denser cities over rural areas in Africa, indicating that migration pull forces remain very strong in the structural transformation process. Moreover, the marginal effects of increases in urban density on household income are very large, with density elasticities of 0.6. In addition to strong city level density effects, we find strong neighborhood effects. For household incomes, both overall city density and density of the own neighborhood matter.

Sub-Saharan Africa has urbanised at tremendous speed over the last half century, in a process that has dramatically reshaped the economic and spatial profile of the region. Simultaneously, it has challenged much of the conventional empirical wisdom about how and why people move to cities. As we show in this article, the traditional view that countries urbanise alongside structural transformation is challenged in Africa, where urbanisation occurs despite low productivity in agriculture, very limited industrialisation, and a high share of primary sector employment across the urban hierarchy. There appear to be large household income gaps between urban and rural areas inducing migration, and these income premiums apply equally well to farm and non-farm families. Looking across the urban hierarchy, we also discuss how urban primacy can be problematic for economic growth in Africa, how secondary cities are lagging in industrial development, and how growth of employment in tradable services may signal a different path to structural transformation in Africa.JEL classifications: J00, J31, O13, O14, O18, O55, R00, R11.

At the heart of urban economics are agglomeration economies, which drive the existence and extent of cities and are also central to structural transformation and the urbanization process. This paper evaluates the use of different measures of economic density in assessing urban agglomeration effects, by examining how well they explain household income differences across cities and neighborhoods in six African countries. We examine simple scale and density measures and more nuanced ones which capture in second moments the extent of clustering within cities. The evidence suggests that more nuanced measures attempting to capture within-city differences in the extent of clustering do no better than a simple density measure in explaining income differences across cities, at least for the current degree of accuracy in measuring clustering. However, simple city scale measures such as total population are inferior to density measures and to some degree misleading. We find large household income premiums from being in bigger and particularly denser cities over rural areas in Africa, indicating that migration pull forces remain very strong in the structural transformation process. Moreover, the marginal effects of increases in urban density on household income are very large, with density elasticities of 0.6. In addition to strong city level density effects, we find strong neighborhood effects. For household incomes, both overall city density and density of the own neighborhood matter.

Pioneering firms have the potential to achieve significant social and economic benefits in fragile and conflict‑affected settings. However, these contexts involve higher risks and costs, which dissuades pioneers and investors. In this policy paper, we argue that the public good these firms provide warrants the use of public funds to offset the costs of pioneering in these settings.