Urbanization, cities and economic growth: trends, recent evidence and policy implications

Abstract

Susanne Frick re-examines ideas about the link between urban agglomeration and economic development and suggests new policy thinking is needed to stimulate economic growth in developed and developing countries. :Introduction: How do urbanization and cities impact economic development?This question has long attracted attention from both academics and policy-makers. The tenor and policy descriptions in most parts of the economics literature have been clear:Urbanization, and more specifically large scale cities, boost people's productivity and hence drive economic growth. Policy-makers should thus favour large cities and concentrated urban structures over a more dispersed spatial development.In recent years, however, this assertion has come under increasing scrutiny. Researchers from different disciplines have painted a more nuanced picture in which city size plays an important role, but not one without limits and only under certain circumstances. The unprecedented city growth in the developing world has further called into question the mantra that cities are always growth enhancing. This idea has been mainly based on developed country evidence, but urban performance in the developing world has not always necessarily followed the same pattern.The following article examines the fundamental changes that have occurred over the past sixty years in terms of urbanization and city growth, discusses the recent literature on the topic, and lays out the implications for policy-makers.It argues that dogmatic policy prescriptions, uniformly favouring big cities and agglomerations, are too simplistic and can often lead to sub-optimal outcomes. A realistic and effective response to this important topic will need to be more multifaceted and involve policy action both at the local and national level.