Cities in the Developing World

1. Cities in the Developing World Edward L. Glaeser Harvard University

2. Outline of Talk • The Importance of Cities • Understanding Agglomeration • Cities and the Economy • Cities and Politics

3. Outline, Continued • Cities and Transportation • Cities and the Environment • Cities and Society • Reflections on Policy

4. The Importance of Cities • Currently, almost one-half of the world’s population lives in cities. • Productivity and Cities appear to go together • Over the next 75 years almost the entire world will become urbanized

5. The Challenge of Cities • It’s all about agglomeration– so nothing is likely to be first best • Cities require massive infrastructure which poses a huge problem for governments • Urbanization changes politics and cities are themselves shaped by politics • Cities pose huge environment challenges (think about when all of China drives) • Cities reform society and break down traditional social structures.

6. Urban Economics: Core Idea • Cities are defined as the absence of physical space between people and firms. • As such, the advantage of cities comes exclusively from eliminating transportation costs for GOODS, PEOPLE and IDEAS. • The Cost of Cities comes from this same proximity and lack of access to land.

7. Three Core Comparative Statics • The Demand for Cities is always fueled by the demand for interaction • As agriculture is land-intensive, it is non-urban and the rise of cities requires food. • Urban form and location is driven by transportation technologies.

8. Moving Goods Cities initially formed for protection (the original agglomeration economy and to reduce the costs of moving goods. • Seaports and railroad hubs. • Then the self-reinforcing growth of industry in commercial towns. • But Transport Costs for Goods have plummeted

9. The Decline of the Costs of Moving Goods

10. Consequence #1: The Rise of the Consumer City

11. Other Consequences • Decline of Natural Resource Rich Areas within the United States • Decline of Manufacturing Towns • Manufacturing no longer locates near its suppliers/consumers. • Rise of Manufacturing Outside of Developed World

12. Cities do exist to facilitate human contact: moving people • In the workplace, services and social connection. • Business services are the heart of most cities today. • Large labor markets provide insurance for workers, and allow for job-hopping. • Social contact may be as important as work contact.

13. Moving People • The Major Cost of Moving Most People is Time. • As such, over the 20th century, the cost of moving people has increased, not fallen, and probably will continue to rise. • But the car has revolutionized the way that we move people.

14. Edge Cities • (An attempt to be controversial): Edge Cities are actually misnamed. • The important thing about edge cities is not that they are on the edge, but rather that they are built around the car. • As such, car cities would be a better phrase.

15. Why Cars? “Experts” often dislike them because they pollute, cause congestion and can kill. • However, the average commute time in the U.S. by car is 23 minutes, by pt 47 minutes • Big issue is the fixed cost (15-18 minutes) involved in trains or buses. • Cutoff point is somewhere around 10 dollars per hour (China???)

16. Public Transport Use and Commute Times across U.S. Cities

17. The Europeans and their Trains • Fact # 1: In rich European cities, people now drive just like in the U.S. • Fact # 2: In many cities where people rarely drive, commute times are very high: • Moscow 10% drive, 62 minute commute. • Athens 36% drive, 53 minute commute. • Paris 60% drive, 35 minute commute. • US average is 24 minutes.

18. Cars and Travel Time Internationally

19. Cars Totally Change Urban Form • Cities can be built at much lower densities • The centralization of public transportation is replaced by places without a CBD • Space requirements in transport explode and congestion becomes a huge issue.

20. Cars and Space: U.S. Data

21. Cars and Space: International Data

22. Car Cities in the 1990s: Is there a New Urbanism?

23. The Flow of Ideas • The third major ingredient to cities is the flow of ideas. • Ideas require some face to face transmission. • New innovations are created in urban areas. • Evidence on patent cities. • People get access to new ideas. • People learn in cities. • Evidence on urban wages.

24. Ideas and Urban Success • Heavy idea oriented industries are still overconcentrated in city centers. • Think Wall Street. • Increasing importance of ideas makes this a potent force for urban rebound. • The remarkable turnaround of Boston. • The connection between human capital and growth (proxy for ideas).

25. Sun, Sprawl and SKILLS

26. Cities and Productivity • Increases in Density are almost always associated with increases in wealth, most of this is because of the move from agriculture up the productivity ladder.

27. Cities and GDP

28. Density and Median Income across U.S. Counties

29. GDP and Income in 1960

30. Growth and Urbanization

31. No matter what you’ve heard– cities and happiness

32. Development and Urbanization • Development eventually always means urbanization, but this does not suggest that urbanization brings development • The goal must be to manage urban growth, not necessarily to force it. • But there is a basic question of whether development economists are too agricultural in their orientation.

33. Paths to Progress • Traditional View– Move up along the product ladder– agricultural revolution first, then manufacturing revolution • This is certainly how the west grew rich • In a closed economy– it is necessary to increase agricultural productivity before people leave the farms (Bairoch vs. Jacobs)

34. But is this approach right for today’s developing world? • With lower transport costs, countries no longer need to feed themselves. • Four New World Countries appear to have a comparative advantage at most forms of basic agriculture (grains, etc.). • These commodities require land and technology, but not all that much labor.

35. Cities vs. Farms Continued • Many developing countries started off poor because their soil was bad • Furthermore, transportation costs for many agricultural goods are quite high. • Furthermore, the developed world has enacted a set of policies which deeply penalize farmers in the developing world. • As a result– it may make sense to skip over agriculture altogether.

36. Manufacturing, Services and Agriculture • Some boutique agriculture should be done in the developing world (flowers, some vegetables) • For some commodities (coffee) the developing world has a clear comparative advantage • But I suspect that the long run depends on non-agricultural goods– which means fixing cities.

37. Cities and Politics • In the developing world– urbanization influences politics– sometimes to a remarkable degree • At the same time– politics shapes cities. • Presumably, this is often problematic.

38. Cities and their influence on politics • Cities facilitate the flow of information among organizers • The labor movement grows in cities in Europe and the U.S. • The American Revolution is born in Boston (again information flows) • Putting down revolutions is harder in cities than in the countryside (think Haussman)

39. Urbanization Changes Politics • Urbanized countries have more riots– especially when ethnically fragmented • Urbanized countries appear harder for dictators to run– strong correlation between urbanization and democracy • The ability to ignore poverty becomes harder in urban areas

40. Political Sources of Mega-Cities • Only stable democracies tend to protect the rights of people in the hinterland • Otherwise political influence decays with proximity to power (riots or lobbying) • As a result, regimes without rules, tend to favor the capital city (pro-export policies)

41. Dictatorship, Instability and Primacy • Primacy=Share of Urbanized Population in Largest City– Data from 1970-1985 (Ades and Glaeser, 1995) • Dictatorship is Gastil above 3 • Unstable is Revolutions and Coups above Worldwide Mean

42. Politics and Primacy Continued • Stable Democracies 23% (N=23) • Stable Dictatorships 30% (N=16) • Unstable Democracies 35% (N=6) • Unstable Dictatorships 37% (N=39)

43. Legal Origin and Sprawl • Differences across the world in car use is closely correlated with differences across the world in density (see above) • Differences in car use are driven by gas taxes and subsidy of public transportation • Regulated societies tax gas much more highly. • French legal origin societies tax gas much more highly

44. Legal Origin and Cities • French legal origin countries have 50 percent higher gas prices. • French legal origin countries have fewer cars per capita. • French legal origin countries have denser urban areas. (Glaeser and Kahn, 2003).

45. Cities and Transportation • As I have argued throughout transportation dictates where cities are and what they look like. • Big questions: • How many roads to build? • How much to tax gasoline? • How much public transportation to build? • How much to subsidize other infrastructure?

46. Kain’s Law • None of these questions area easy to answer and externalities abound, but one law appears to always hold within cities: • BUS GOOD --- TRAIN BAD • John Kain, who just died, spent much of his life documenting this simple fact.

47. Trains in the Developing World • Fixed Costs of Subways or other people moving rail are huge. • Anything you can do with a subway, you can do with a bus running through a tunnel. • But people are enamored of large scale people-moving trains. • This is something worth fighting.

48. Cities and the Environment • Urban production often creates environmental challenges (although agriculture does too) • Transportation is particularly rife with environmental consequences • Cramming people together has its own problems– health and waste

49. A Basic Claim • The answer to this is not to stymie cities or to stop the rise of the car • But likewise the answer is not the unfettered free market either– think of catalytic converters • Get rid of old cars and pave streets • Remember the gdp/infant mortality relationship is strong– stopping growth to save the environment does cost lives.

50. Cities and Society • Basic Idea: City air makes you free and this is both good and bad. • Traditional social structures are maintained with community sanctions, and the ultimate threat is expulsion. • In cities, flight is easy, there is always another community to join, and traditional norms break down.