Transcript Urbanization and Poverty Reduction Peter Hazell Introduction • In 2008 the World Bank published its World Development Report 2008: Agriculture for Development in which.

Urbanization and Poverty
Reduction
Peter Hazell
Introduction
• In 2008 the World Bank published its World Development
Report 2008: Agriculture for Development in which it argued
that agricultural development is the key to pro-poor growth.
• In 2009 the very same World Bank published its World
Development Report 2009: Reshaping Economic Geography
in which it argued that urban development is the key to
growth, and policies towards rural areas should be sector
neutral and focus on improving connectedness and human
capital.
• How does one resolve this apparent dissociative identity
disorder? Must we really choose between rural and urban
development?
 In reality the economies of urban and rural areas are
interlinked, so strategies for pro-poor growth need to
be based on more spatially balanced investments and
policies.
 What do we know about these linkages?
 let me propose the following evidence-based
propositions.
(I draw on the synthesis in: Haggblade, S., P. Hazell and
T. Reardon (eds.). 2007. Transforming the Rural
Nonfarm Economy. Johns Hopkins University Press,
Baltimore)
Prop 1. Growth in the urban and
rural sectors is interlinked
 Agricultural growth helps drive the non-farm economy in
both rural and urban areas through its farm-nonfarm growth
linkages (e.g. increased demands for modern farm inputs,
marketing and processing services, household demand for
consumption and investment goods and services, supply of
savings, and a more abundant supply of foods and raw
materials).
 Growth of the non-agricultural economy and urbanization
generates backward linkages to agriculture and the rural
nonfarm economy through urban-rural growth linkages (e.g.
increased demand for foods, supply of new types of farm
inputs and technologies, wage earnings and remittances,
contracting of intermediate goods to rural nonfarm firms by
urban based industry).
 The absolute sizes of these two types of linkages (the
multipliers) become more powerful as countries
develop (e.g. in the US, the agricultural sector
leverages a huge agribusiness sector while income
flows from urban based occupations dominate rural
household incomes).
 The relative importance of farm-nonfarm and ruralurban linkages tend to dominate during early agrarian
stages of development, but the urban-rural linkages
become more important as the non-agricultural
economy, urbanization and per capita incomes grow.
Prop 2. The impact of the farm-nonfarm growth linkages on
patterns of urbanization is strongly influenced by the initial
densities of rural population, infrastructure and market
towns
 In Asia, the Green Revolution spread across regions that
were already densely populated with good road networks
and many market towns, and the farm-nonfarm linkages
contributed to spatially dispersed patterns of urbanization
(i.e. many small market towns developed into intermediate
sized towns)
 In much of Sub-Saharan Africa, and to some extent Latin
America, rural populations and roads are more spatially
sparse, and rural towns are few and far between (the
missing middle). Here the linkages from agricultural growth
tend to be captured by large urban centers, contributing to
more spatially concentrated patterns of urbanization.
Prop 3. The impact of the urban-rural growth linkages is also
influenced by the initial densities of rural population,
infrastructure and market towns
 Large urban centers stimulate growth in high value (especially
perishable) agriculture in peri-urban and well-connected rural areas,
but the geographic reach of this linkage is greater given good rural
road networks, which in turn depends on the spatial density of rural
populations and towns.
 Much the same goes for the backward contracting of industrial
intermediate goods by urban based industries.
 Large urban centers attract seasonal and full time migrants from
rural areas who send remittances back home, but the highest share of
off-farm income in rural areas typically comes from local and often
part time sources of off-farm income. Opportunities for this type of
rural household income diversification are greater when urban areas
are more spatially dispersed (e.g. lots of intermediate sized towns
and good road networks).
Implications
 Many developing countries have reached the point where urban
development and urban-rural linkages are now dominant engines of
growth. However, as evidenced in WDR2008, complementary investments
in agricultural development can still pay off in their own right, and the
relationships discussed above suggest that agriculture can still leverage
strong synergies between urban and rural development. These synergies
will be greater in countries with high rural densities of people,
infrastructure and market towns.
 A more balanced spatial pattern of investment is also likely to be more
successful in reducing poverty, though the evidence base is less complete.
We know that most of the poor still live in rural areas, that in aggregate
agriculture has a higher poverty reduction elasticity than industry, and that
the farm-nonfarm linkages are beneficial to the poor in rural areas and
market towns. But we know much less about the net poverty reducing
power of urban-rural linkages in rural areas, or of rural-urban linkages in
large cities.