Prosperity in a Rapidly Urbanising World; Where Do We Go From Here?

Xavier Lemaire and Daniel Kerr from UCL recently attended a talk entitled “Prosperity in a rapidly urbanising world; Where do we go from here?” given at UCL by Dr Julio Davlia from the Institute of Global Prosperity at UCL’s Development Planning Unit. The talk was focused around the challenge of improving prosperity and economic development in the developing world whilst facing the constraints, challenges and opportunities of a rapidly urbanising world.

The presentation began with an investigation of the causes of modern urbanisation in a sociological sense (in terms of modernisation theory), and also from the point of view of development economics, including the Harris-Todaro model of rural-urban migration, and examining the pull and push factors that affect developing countries (for example, greater employment opportunities and higher wages in cities compared to rural areas).

Dr Davila went on to highlight a number of correlations in the field of urbanisation and prosperity. Strong positive correlations exist between the proportion of population urbanised in an economy and GDP per capita in the country, as well as with life expectancy, rising with the urbanisation rate. Strong negative correlations also exist with child mortality and urbanisation. However, an interesting implication particularly for municipal governments is that tax revenue as a percentage of GDP offers no correlation with an increasing urbanised population. Instead, recovery rates are mostly flat as urbanisation increases. This has significant impacts for municipal governments: with rising urban populations and a flat tax revenue growth rate, the provision of urban services will become more difficult.

A common case study in urbanisation and development is that of Medellin, Colombia. The municipal government of Medellin pursued an innovative approach to the growing urbanisation and pressure on urban services in the city, pursuing formalisation activities contra to new builds and relocation. Space upgrades and the maintaining of the social fabric that had arisen in the cities contributed to a sustainable urbanisation for the city. Mass transit and public rapid transit have been focuses of the municipal government, for example in the construction of escalators between the hillside formerly-informal settlements and the central business district. The formalisation activities have also greatly helped with public buy-in, and public support for the government’s schemes is high.

Medellin, Colombia Escalators

Medellin, Colombia: Escalators from Communa 13 to the CBD – image: wnyc.com

Finally, Dr Davlia returned to the issue of municipal revenue streams and the problem of low taxation returns. Control over local levels of taxation for municipal governments is a key factor for sustainable urban development, and the issue of slipping taxation revenues leading to a downward spiral of non-payment and service degradation has been touched on before in this blog. With the ability to properly target taxation to achieve the municipal government’s social and developmental goals, this spiral can be avoided, and service delivery can improve.

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