Download Urbanization with and without Industrialization

Introduction Evidence Model Implications Conclusion
Urbanization with and without
Industrialization
Douglas Gollin
University of Oxford
Remi Jedwab (GWU)
Dietrich Vollrath (Houston)
WB-GWU Conference on Urbanization and Poverty Reduction
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Research Question
I
Urbanization associated with structural change:
Green revolution, industrial revolution → industrialization.
I
In some parts of the world (Africa), urbanization without industrialization. Where do these cities come from?
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Where do these cities come from?
Traffic jam in Lagos, Nigeria (Source: Engineering Consultancy (Nigeria) Ltd).
300,000 inh. in 1956, 11 millions today, empl. share of manufacturing: 3%.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Where do these cities come from?
Kinshasa, DRC (Source: Jean-Jacques Frouein, Visoterra).
400,000 inh. in 1958, 9 millions today, empl. share of manufacturing < 10%.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Where do these cities come from?
Khartoum, Sudan (Source: Marco di Lauro/Getty Images).
460,000 inh. in 1964, 5 millions today, empl. share of manufacturing: 7%.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Research Question
I
Urbanization associated with structural change:
Green revolution, industrial revolution → industrialization.
I
In some parts of the world (Africa), urbanization without industrialization. Where do these cities come from?
What we do:
1. Motivating evidence on urbanization w/o industrialization.
2. Structural transformation model where resource exports drive
urbanization: Surplus income → consumption cities, with mostly
non-tradable services.
3. Implications of this type of urbanization on long-run growth.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Motivating Evidence
I
Urbanization associated with structural transformation:
I
Decline of agriculture, rise of manufacturing, tradable services:
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Push: Green revolution (Schultz 1953, Matsuyama 1992, Gollin,
Parente & Rogerson 2002, Michaels, Rauch & Redding 2011)
Pull: Industrial revolution (Lewis 1954, Matsuyama 1992, Hansen
& Prescott 2002, Galor & Mountford 2008, Lucas 2009)
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Motivating Evidence
I
Urbanization associated with structural transformation:
I
Decline of agriculture, rise of manufacturing, tradable services:
I
I
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Push: Green revolution (Schultz 1953, Matsuyama 1992, Gollin,
Parente & Rogerson 2002, Michaels, Rauch & Redding 2011)
Pull: Industrial revolution (Lewis 1954, Matsuyama 1992, Hansen
& Prescott 2002, Galor & Mountford 2008, Lucas 2009)
Urbanization promotes self-sustained growth:
I
Returns-to-scale and agglomeration economies:
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Developed countries (Glaeser et al. 1992, Duranton & Puga
2003, Rosenthal & Strange 2004, Henderson 2005)
Developing countries (Overman & Venables 2005, Duranton
2008, Henderson 2010, Felkner & Townsend 2012)
Virtuous circle between development and urbanization: Europe/US, Asia
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Urbanization and Industrialization for Developing Countries, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 119 developing countries: Asia
(30), Africa (46), LAC (26) and MENA (17).
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Urbanization and Industrialization for Developing Countries, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 119 developing countries: Asia
(30), Africa (46), LAC (26) and MENA (17). NRX = natural resource exports in GDP (%)
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Urbanization with Industrialization for Resource Poor Countries, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 49 resource poor developing
countries in 2000. NRX = natural resource exports in GDP (%)
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Urbanization without Industrialization for Resource Rich Countries, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 70 resource rich developing
countries in 2000. NRX = natural resource exports in GDP (%)
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Urbanization without Industrialization for Resource Rich Countries, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 70 resource rich developing
countries in 2000. NRX = natural resource exports in GDP (%)
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
This Paper’s Approach
I
We take a theoretical approach and adapt a standard model of
structural change to explain how natural resource exports:
1. Drive urbanization.
2. Give rise to a “different” type of urbanization (sectoral composition), which may have implications for long-run growth.
I
Empirical analysis using a sample of 119 developing countries:
1. Additional motivating evidence at the continental level.
2. Cross-sectional multivariate analysis (not intended to show causation).
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Question Motivation Approach Outline
Outline
I
Additional motivating evidence
I
Conceptual Framework
I
Implications for Growth
I
Conclusion
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Outline
I
Additional motivating evidence
I
Conceptual Framework
I
Implications for Growth
I
Conclusion
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization Rate for Four Groups of Countries, 1950-2010
Sources: WUP 2011. Data for 119 developing countries: Asia (30), Africa (46), LAC (26) and
MENA (17). Averages are estimated using the population weights for the same year.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization with Industrialization in Asia, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 29 Asian countries.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Additional Motivating Evidence
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Africa has recently experienced dramatic urban growth:
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Urbanization rate:
10% in 1950 (≈ Asia)
40% in 2010 (≈ Asia)
Large cities (> 750,000): 40% of urban pop (≈ Asia)
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Additional Motivating Evidence
I
Africa has recently experienced dramatic urban growth:
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Urbanization rate:
10% in 1950 (≈ Asia)
40% in 2010 (≈ Asia)
Large cities (> 750,000): 40% of urban pop (≈ Asia)
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Is African urbanization different?
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Not in line with standard structural change models:
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Low food yields (Restuccia, Yang & Zhu 2008, Gollin 2010)
Small and/or unproductive manufacturing and service sectors
(Caselli 2005, McMillan & Rodrik 2011)
The most urbanized African countries export natural resources:
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I
I
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Significant resource endowments at independence
Fuels, mining products or cash crops (cocoa, coffee, etc.)
High mark-up rates (inelastic international supply)
Jedwab 2012, Henderson, Roberts & Storeygard 2012
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization without Industrialization in Africa, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 46 African countries.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization without Industrialization in Africa, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 46 African countries.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization without Industrialization in Africa, 1960-2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 46 African countries.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization with Industrialization in LAC, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 26 LAC countries. Correlation
robust to dropping Guyana (GUY), Trinidad (TTO), Haiti (HTI) and Venezuela (VEN).
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Urbanization without Industrialization in MENA, 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012. Data for 17 MENA countries. Correlation robust to dropping Lebanon (LBN), Jordan (JOR) and Yemen (YEM).
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
Cross-Sectional Multivariate Analysis
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Cross-sectional regression for countries c for the year 2000:
Urb.ratec,2000 = α + Mfgservc,2000 β + Nrxc,2000 γ + uc,t
Mfgservc,2000 : Share of manufacturing and services in GDP (%)
Nrxc,2000 : Share of natural resource exports in GDP (%)
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Population-weighted, area FE (Asia, Africa, LAC, MENA), ctrls:
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Urban definition: type (admin, threshold, threshold + admin,
threshold + condition) and threshold
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Physical geography: area, small island, landlocked, droughts
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Economic geography: population, rural density (rural pop per
sq km of arable area), pop growth rate in 1960-2000
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Institutions: autocracy (av. combined polity score < -5), dummy
interstate or civil conflict since independence
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Additional Motivating Evidence Multivariate Analysis
TABLE 1: MULTIVARIATE CROSS-SECTIONAL ANALYSIS
Dependent Variable:
Urbanization Rate in 2000 (%)
(1)
(2)
(3)
(4)
(5)
Asia
(6)
Africa
Natural Resource Exports
(% of GDP, 2000)
1.28***
[0.19]
0.89***
[0.17]
0.68***
[0.13]
0.50***
[0.11]
-0.10
[0.47]
0.55***
[0.10]
Manufacturing & Services
(% of GDP, 2000)
1.29***
[0.21]
0.91***
[0.23]
0.57***
[0.10]
0.33***
[0.10]
1.26***
[0.28]
0.40***
[0.19]
Area Fixed Effects (4)
Controls
Ctrl Initial Conditions 1960
Observations
R-squared
N
N
N
119
0.53
Y
N
N
119
0.68
Y
Y
N
119
0.82
Y
Y
Y
114
0.90
Y
Y
N
30
0.81
Y
Y
Y
46
0.71
Notes: Robust SEs in parentheses; * p<0.10, ** p<0.05, *** p<0.01. The sample consists of 119
developing countries across 4 areas: Asia (30), SSA (46), LAC (26) and MENA (17). Controls:
urban definition, area, population, rural density, population growth, small island, landlocked,
droughts, autocracy, conflict. Initial conditions: urbanization rate and resource exports in 1960.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Intro
Outline
I
Additional motivating evidence
I
Conceptual Framework
I
Implications for Growth
I
Conclusion
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Intro
Conceptual Framework (Model in the paper)
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Structural transformation: decline in agriculture, rise of manufacturing (and/or tradable services).
I
Standard models of structural change:
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Labor push: a rise in food productivity (green revolution) increases food availability and release labor for the modern sector.
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Labor pull: a rise in mfg productivity (industrial revolution)
attracts underemployed labor from agri. into the modern sector.
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Trade: comparative advantage in mfg (tradable services) → mfg
X and food M → acceleration of structural change.
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Production cities: trade → mfg exporting cities that arise because of a specialization effect (in urban-based sectors).
I
Urbanization without green revolution and industrial revolution?
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Intro
Conceptual Framework (Model in the paper)
I
Resource production does not contribute to urban growth:
I
I
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Mineral production capital-intensive (e.g, oil 60% of GDP in
Angola, only employs 10,000 nationals)
Cash crops produced in fields (rural employment)
Model with four sectors: food, urban tradables (tradable mfg,
serv), urban non-tradables (non-tradable mfg, serv), resources
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Intro
Conceptual Framework (Model in the paper)
I
Resource production does not contribute to urban growth:
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I
I
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Resource production has consumption linkages:
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I
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I
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Mineral production capital-intensive (e.g, oil 60% of GDP in
Angola, only employs 10,000 nationals)
Cash crops produced in fields (rural employment)
Model with four sectors: food, urban tradables (tradable mfg,
serv), urban non-tradables (non-tradable mfg, serv), resources
Massive surplus generated for producing countries
(10x more than aid and remittances)
Relaxes the food constraint through food imports
Surplus income spent on urban goods and services (labor pull)
Urbanization through the rise of consumption cities
Urban tradables and/or urban non-tradables?
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Intro
Conceptual Framework (Model in the paper)
I
A subsistence economy urbanize without industrializing (unlike
the Dutch Disease model of deindustrialization).
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Stronger effects for mining/fuels vs cash crops.
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If no resource sector, the country industrialize and urbanize
through the rise of production cities.
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Extension: Non-homothetic preferences accelerate urbanization
if the distribution of the rent is unequal.
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Extension: Government taxation accelerates urbanization (gvt’s
Engel curve: civil servants, gvt region: primacy).
I
Extension: No capital accumulation in the model. Consumption cities cannot evolve into production cities.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Other Stylized Facts Discussion
Outline
I
Additional motivating evidence
I
Conceptual Framework
I
Implications for Growth
I
Conclusion
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Other Stylized Facts Discussion
Other Stylized Facts
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Stylized fact: urbanization associated with resource exports.
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In the model, the resource rich countries:
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urbanize because they are wealthier,
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import more food and tradables,
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their consumption cities have mostly non-tradable workers.
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The numerical simulations match the patterns found in the
data.
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For example, cities in resource rich countries associated with
less employment in urban tradables? Outcome: employment
share of manufacturing and finance, insurance, real estate and
business services for the urban areas in 2000.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Other Stylized Facts Discussion
Resource Exports and the Sectoral Composition of the Urban Areas 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012, IPUMS 2012, labor force and household
surveys, censuses. Data for 65 countries. Mfg: manufacturing. Fire: finance, insurance, real
estate and business services.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Other Stylized Facts Discussion
Resource Exports and the Sectoral Composition of the Largest City 2000
Sources: WUP 2011, FAO 2012, USGS 2012, WDI 2012, IPUMS 2012, labor force and household
surveys, censuses. Data for 66 countries. Mfg: manufacturing. Fire: finance, insurance, real
estate and business services.
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Other Stylized Facts Discussion
Discussion: Implications for Growth?
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Literature on production cities: structural change → cities with
tradable workers → agglomeration economies → growth.
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Consumption cities → cities with non-tradable workers →
second best type of urbanization (welfare-increasing).
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Productivity growth is slower in services, while unconditional
convergence in manufacturing.
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Potential mechanisms? (i) lack of competition in non-tradable
sectors (no global competitors), (ii) incentives for human K accumulation, (iii) agglomeration economies, (iv) reforms (urban
middle-class vs. urban elite).
I
In the long run, consumption cities could evolve into production
cities. Constraints? Trade, institutions?
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Conclusion
Outline
I
Additional motivating evidence
I
Conceptual Framework
I
Implications for Growth
I
Conclusion
Douglas Gollin (Oxford)
Urbanization with and without Industrialization
Introduction Evidence Model Implications Conclusion
Conclusion
Conclusion
I
Most developing countries have experienced urbanization with
industrialization (e.g, Asia, LAC). Urbanization in production
cities (tradable and non-tradable workers).
I
Most resource rich countries have experienced urbanization
without industrialization (e.g., Africa, MENA). Urbanization
in consumption cities (mostly non-tradable services).
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This may have implications for long-run growth.
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Research agenda:
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Panel data analysis for 119 countries in 1960-2000.
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Can consumption cities evolve into production cities? Yes: US,
Dubai, South Africa, etc. Constraints? Trade, institutions?
Douglas Gollin (Oxford)
Urbanization with and without Industrialization